Tuesday, April 22, 2008

Google's impact on the Bay Area economy

This remarkable note on on job growth in Silicon Valley highlights how Google is completely dominating the market.
Google added over 5,592 jobs in Mountain, representing over 50% of the growth in "Internet Services."

5,592 net new local jobs represents 77%(!) of the reported 7,300 total Santa Clara County jobs added in 2007!!

As an aside, assuming a typical 10,000 share option package vested over four years, every Google employee in-place at or before the IPO collects 2,500 shares time ~$450 for a gross of ~ $1,125K per year. (It was "only" $922K before last week's 20% short squeeze.)

This steady cash infusion amost certainly served to sustain local house price growth. After all, who cares about "overpaying" by even a few-hundred thousand dollars when you "know" you're going to get another million next year, and the year after, and...

This month marks four years since Google's April, 2004 IPO. To the extent Google's stock price declines further, or even just flattens below it's ~$711 peak, Google-driven liquidity and its impact on local house prices should start to work in reverse.
So, Google is driving three quarters of job growth in the area -- amazing! Google does not have stock options, it has restricted stock units, but assuming they were there at IPO, 2000 area employees are going to be about $1M richer this year.

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