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Bay Area job losses are largest in nation By George Avalos CONTRA COSTA TIMES
July 27, 2003
To find the bottom of America's economic barrel, you don't have to go very far.
No question, it's not that much of a shock to learn the Bay Area has a soft employment picture. The evidence, after all, is plentiful.
We've witnessed the dot-com meltdown, a steady stream of high-tech cutbacks and numerous empty office buildings. More than a few of us know somebody who's lost a job, endured reduced work hours, or suffered a pay cut.
But it turns out the Bay Area employment market may be even more dismal than many people had imagined. The layoffs in the area during the economic downturn are so staggering that the Bay Area has become saddled with the nation's weakest job market.
The Bay Area is worse than New York City and the Washington-Baltimore area, where terrorist attacks inflicted death, destruction and economic mayhem. It's worse than rust-belt hubs such as Detroit, Pittsburgh and Chicago. The Bay Area has taken a bigger nose-dive than its cross-state rival, Los Angeles.
The bleak bottom line: Over the past two years, no other major urban center in the United States has even come close to the employment debacle in the Bay Area, both in terms of total jobs lost and percent decline in the number of jobs, according to a Times study of the job markets for the nation's 30 largest metropolises.
The Bay Area's downturn began in the spring of 2001, when employment in the United States entered a steady decline because of the recession.
"What has happened in the Bay Area is somewhat similar to what happened in the Los Angeles area in the 1990s," said Mark Doms, an economist with the Federal Reserve Bank in San Francisco. Southern California a decade ago was devastated by big cutbacks in the aerospace and defense industries after the end of the Cold War.
This time, the over-heated expansion during the late 1990s of the Internet and telecommunications industries -- which fueled spectacular job growth in the Bay Area, especially in the technology sector -- is the culprit. Employment ballooned and then deflated when it became clear that much of the Internet-related growth prospects were phony.
"The Bay Area has much further to fall than the rest of the nation," Doms said.
How bad is the decline? So far this year, the number of people in the private industry work force in the Bay Area has averaged about 2.46 million. That's the lowest level since 1996, when the private industry job base totaled 2.36 million.
The East Bay private job market is at its lowest level since 1999, the San Francisco area is at the lowest point since 1996, while Santa Clara County has its smallest number of private jobs since 1995.
"The more you inflate the balloon, the louder the explosion is going to be when it pops," Doms said.
Pop it did. Over the two years from June 2001 through June 2003, the Bay Area lost about 275,000 private-sector jobs, according to a Times analysis of data from the U.S. Bureau of Labor Statistics. That amounted to a decline of about 10 percent in the Bay Area private work force, which excludes government employment.
This is in sharp contrast with what happened during the boom years in the Bay Area. From mid-1999 through mid-2001, years in which the Bay Area hit record employment levels, the Bay Area private work force grew by 4.3 percent, ninth-best in the nation. The region created about 113,000 private-sector jobs in those two years.
"It was a spectacular rise and a spectacular fall," said Tapan Munroe, chief economist for the Capital Corporation of the West, a bank holding company. "The Bay Area had one of the most striking boom-bust cycles ever."
Not all parts of the Bay Area have suffered to the same extent. Much of the job losses over the past two years have been concentrated in Santa Clara County and the San Francisco area. Santa Clara County lost nearly 17 percent of its private work force, while the San Francisco-San Mateo-Marin area fell by about 10 percent. The East Bay was down a much more modest 3 percent.
The slump of the early 1990s, which was spawned by the 1991 recession, was far more mild in this region than what is happening these days. Over the two years from the employment peak of 1990, the Bay Area lost about 60,000 jobs, or a 2.7 percent decline. The East Bay was again the strongest performer, and the San Francisco area was the weakest during that slump, according to figures from the Employment Development Department.
The Bay Area's total job losses in the private sector have far exceeded what happened in New York, despite New York's much larger labor base.
The Big Apple lost about 192,000 private-industry jobs over two years, which translated into a 5.3 percent decline. The Bay Area, New York, Chicago, Dallas-Fort Worth and Boston all lost 100,000 or more private-sector jobs during the two years that ended in June.
But the Bay Area was the only urban center with double-digit percent job losses.
The five worst job markets in the country, based on the percentage of job lost in the private sector, were the Bay Area, Boston, Indianapolis, Seattle and Portland. Four of the five regions -- Indianapolis being the exception -- have high-tech as a dominant industry.
"We have had a depression in technology," said Sung Won Sohn, chief economic officer with San Francisco-based Wells Fargo Bank.
The Bay Area also has been hammered because it's been a dreadful two or three years for nontech industries that are crucial to the regional economy. Mary Daly, a Federal Reserve Bank economist in San Francisco, pointed out that the Bay Area's woes can't all be blamed on high-tech.
"The decline in international travel, associated with the weaker global economy, post-9/11 problems and the real rapid decline in business travel, all put tremendous pressure on the Bay Area tourism and trade sector," Daly said.
And after Sept. 11, the problems for tourism intensified. "International travel has been the weakest of all the travel categories," Daly said.
But like other researchers, Daly believes the technology industry's slump is the primary force that has crippled the Bay Area economy.
The East Bay may have been able to dodge much of the employment slump the past two years largely because the Internet bubble became especially bloated in Santa Clara County and San Francisco's South of Market district. Since the East Bay never became a hot-bed for dot-com start-ups, it didn't have as many of those high-tech jobs to lose.
To be sure, the East Bay got plenty of high-tech companies during the 1990s. But instead of headline-grabbing online companies that had little chance of ever turning a profit, the East Bay's tech firms consisted of companies with more prosaic or stable technologies, such as business software suppliers PeopleSoft Inc., Sybase Inc. and Documentum Inc., or computer animator Pixar Inc.
As dreadful as the technology downturn has been, some researchers warn that a rebound in the Bay Area technology scene might not appear on the horizon right away.
"Because the downturn has devastated the technology market, because it was hit that hard, it will take a while for that sector to stabilize and recover," Sohn said.
How bad is the tech downturn? Although the Bay Area's private work force is down about 10 percent during the past two years, the number of technology jobs has fallen 28 percent. The San Francisco area has lost 36 percent of its high-tech jobs, Santa Clara County has lost 29 percent, and the East Bay has lost 20 percent of its high-tech work force since mid-2001, according to data from the state's Employment Development Department.
Over the past two years, the Bay Area has lost nearly 117,000 tech jobs. This includes computer and electronics manufacturing, software, telecommunications, computer services and Internet-related jobs. The tech sector alone accounts for a whopping 40 percent of all job losses in the Bay Area since June 2001, an analysis of the EDD data shows.
The tech softness has made it tough for workers in that industry to find employment.
"I gave up on the high-tech area, because there are too many competitors looking for too few jobs," said Rick Kojo, a Fremont resident who had spent months seeking a high-tech job.
Now, Kojo hopes for a better result in jobs that have little, if anything, to do with high-tech.
"Maybe a warehouse job, maybe customer service, even something in retail," said Kojo, who is bilingual in English and Japanese. He spent years in the software quality assurance arena until the tech industry imploded in the Bay Area, and he had been searching for positions in the biotechnology and medical fields.
Some job hunters have managed to find more fertile ground in technology. But even for successful seekers such as Pamala Simpson, the search for a new tech job was anything but easy. Simpson was laid off from a Sunnyvale company last October but couldn't find anything until June. She's now working as a software program contract manager for Wells Fargo & Co. in San Francisco.
"This was the most difficult job search I've ever had," said Simpson, who lives in Fremont. "It's definitely a different market."
Employers are more than choosy. They are downright stingy. Before, it was sufficient to simply be an experienced software developer. Now, employers demand specific skills such as experience with the Java programming language, enterprise systems and knowledge of Sun Solaris and Windows NT. And that's just the start of what companies require nowadays.
"You need to really be able to communicate," Simpson said. "You really have to communicate your skills and sell yourself for that particular position. If you can't do that, you won't get past the initial screening."
Rich Yacco, a Fremont resident, has been looking for about four months in marketing communications related to video production, Web design and graphic design. But he's had little luck so far.
"It gets frustrating," Yacco said. "I feel I have a lot to offer employers. But because there are so many talented people out there, the employers are definitely calling the shots."
Yacco is over 50, and he fears that his age may be a drawback. He suspects some companies prefer to go with younger employees who might be willing to work for less money.
During this downturn, Yacco fears that the Bay Area's employment woes have cut a wide swath through the region's economy.
"I don't remember ever hearing about so many areas of the economy being rough," Yacco said. "You hear about problems in the educational area, teachers being laid off, cutbacks in police and fire. I don't recall things were so bad across the board."
Still, industry watchers believe the Bay Area is in position to rebound sometime in the next year or so.
For one thing, the Bay Area has all the fundamentals in place for a strong economy that's bolstered by technology. The Employment Development Department projects that the tech industry will reverse course in the Bay Area and generate substantial job growth over the next three years.
"The labor force is better-educated in the Bay Area; it is a more risk-taking, innovation-driven environment," Sohn at Wells Fargo said. "And there is access to intellectual capital from the universities and the government laboratories."
What's more, the Bay Area's unique services are likely to regain their luster and once again be in demand down the road, said Matt Ward, chief executive officer of San Francisco-based WestWard Pay Strategies, which tracks compensation in the tech industry.
"The Internet will be pervasive," Ward said. "It will be part of our life, and there will be a huge need for it. It's going to be in your car, in your bicycle, in pay toilets, in everything. There's the revolution in HDTV and telecommunications, and somebody has to deliver that. Tech isn't dead by any means."
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