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Brookings report: San Francisco is still the center of tech

For all the hullabaloo that San Francisco is over — long live “Zoom towns” and the rise of remote work — the reality is much more mixed, according to a new report from Brookings Institution.

Brookings found that, despite anecdotal evidence to the contrary, regional tech hubs like San Francisco, Seattle and New York actually expanded their share of tech jobs during the pandemic.

“Anybody who thinks that the big tech hubs are sad and closing down is wrong,” said Mark Muro, a senior fellow and policy director at Brookings Metro.

Muro ascribed the continued dominance of regional tech superpowers like the Bay Area to the fact that they’re still “crucial” to early-stage business development and R&D work for startups. These major cities are often where the corporate research labs and areas for collaboration are. As tech companies mature, that’s when they start to recruit elsewhere.

Graph: Brookings Institution

That doesn’t mean the rest of the US missed out on the action. The report also found that employment growth increased in midsized and small cities, including Atlanta, St Louis and Birmingham.

People are overemphasizing the remote work boom, according to Muro. In his opinion, the shift to smaller cities in the South and Midwest is more likely driven by the industry’s desire to source more diverse talent. Some of the cities with the biggest rise in employment growth compared to pre-pandemic include Atlanta and Birmingham, both known for their technical talent and proximity to HBCUs and other respected public universities, as well as a high quality of life and decent weather.

“I think that’s really an attraction for a sector that is under pressure to show progress on diversity,” he said.

Major tech companies like Apple, Alphabet and Microsoft have recently opened offices in Atlanta, which in recent years has become a major magnet for tech companies looking to invest in Black talent.

Companies are “trying to have it both ways: maintaining core activities in the superstar hubs, but also trying to follow workers with remote work offerings or creating new offices in new places,” Muro said.

Despite rumors that cities like New York are in trouble in the wake of the remote work boom, companies like Google are investing in expensive new real estate and calling their employees back to the office. Rents have soared back to pre-pandemic heights, and in some cases, surpassed their pre-pandemic levels.

Graph: Brookings Institution

Unlike most research on geographic shifts in employment trends, the report from Brookings did not rely on real estate or survey data. Instead, it analyzed The Bureau of Labor Statistics’ Quarterly Census of Employment and Wages as well as job postings data.

Muro characterized the shift in tech employment trends as a “winner takes most” dynamic accompanied by a modest “rise of the rest” scenario.

Time will tell how things shake out. The industry is at a “juncture,” and it would take a couple of years to determine whether these shifts are a temporary disruption or an inflection point, according to Muro. That being said, he “would never bet against the big hubs.”

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