ay Area Economic Pulse
by Michael Dardia
The Bay Area economy continued its two-year-long slide into the first quarter of 2003, while revised employment data show that job losses in the Bay Area have been much worse than originally reported. In 2001, employment declined in all sectors except health, education and government; and tech-dominated sectors suffered job losses of 10 percent or more. The rate of job loss slowed somewhat in 2002, with every sector (except construction) having a lower rate of decline in 2002 than in 2001. On a seasonally adjusted basis, regional employment continued to decline in the first quarter of 2003, but at a slightly slower rate than in 2002.
Worst Recession Since World War II
Since the last economic update in this magazine, the state has released newer employment figures that confirm what many have suspected: job losses in the Bay Area have been much larger than originally estimated. Last quarter, we reported that Bay Area employment fell by 196,000 between December 2000 and December 2002, a 5.5 percent decline. The revised data show that the actual Bay Area decline was 313,000 (8.7 percent), making the recession more severe than any in the post-World War II period.
In comparison to the job losses that the Los Angeles region experienced at the same point into its deep recession a decade ago, the Bay Area decline has been significantly steeper. The revised data show larger job losses in all Bay Area regions except for the Vallejo-Fairfield-Napa area, which alone fared better in the recalculation. Job losses in San Jose metro in 2001 and 2002 amounted to 16 percent of peak employment, and San Francisco metro losses totaled almost 12 percent. Thanks to its smaller exposure to information technology sectors, East Bay and North Bay employment has fallen by less than 2 percent, and the Vallejo-Fairfield-Napa metro area has actually registered gains of 4 percent since late 2000.
The updated figures emerged from an annual benchmarking that is done for industry employment tabulations. Monthly employment tallies are based on a survey of employers and can sometimes miss sudden job changes, especially at smaller employers that are less likely to be surveyed. The monthly employment series is updated once a year by comparing the monthly survey results to actual payroll records for all employers in the state. Some analysts had been suspicious that the reported job losses were not accurate when personal income tax receipts repeatedly came in lower than anticipated. The data reported in this issue reflect the newly corrected figures.
Revised Industry Categories
Starting with this issue, employment data will also be reported using a new system for classifying industries. The Bureau of Labor Statistics has replaced the old SIC (Standard Industrial Classification) definitions of industries with the new NAICS (North American Industrial Classifications System) structure. Among its goals, NAICS is intended to provide a clearer picture of the service sector of the economy and to establish a uniform coding system among the United States, Canada and Mexico. In recognition of the important role of information and data in the economy, NAICS created a new category for information businesses, including software, publishing (print, audio, video), telecommunications, internet services and broadcasting. The information technology manufacturing industries that were in several separate SIC groups are now classified as Computer and Electronic Product Manufacturing. These new data will permit better tracking of several key sectors, but their introduction makes some comparisons to past data difficult.