Technology Industries Helped Post-Great Recession Jobs Grow Faster in Northern Than in Southern California

Monthly Labor Review, December 2014 | Go to article overview

Technology Industries Helped Post-Great Recession Jobs Grow Faster in Northern Than in Southern California


As California's labor market recovery continues in 2014, a lot of attention is being paid to the Bay Area technology industry, including the industries with a strong presence in Silicon Valley. Employment in this part of the economy has grown at a rate that has propped up the recovery of all nonfarm employment throughout the state. This surge in employment is particularly interesting because it highlights the difference in how northern and southern California have fared recovering jobs after the Great Recession. (1) The current rate of growth in technology contrasts greatly with this industry's performance in the wake of the 2001 recession. During that period, the tech industry suffered a substantial decline. As a result, large, northern California cities like San Francisco and San Jose lagged behind their southern counterparts--including Los Angeles, San Diego, and Riverside. Southern California cities generally benefited from having smaller technology centers, and were buoyed by their dominant leisure and hospitality industry. (2)

As the state recovers from the 2007-2009 recession, the tables have turned. Employment in technology-driven industries is growing at a faster pace than other industries. Accordingly, employment growth in several large, northern California cities is outpacing growth in southern parts of the state.

This article offers a look at California employment growth in four different North American Industry Classification System (NAICS) sectors--professional and business services, information, leisure and hospitality, and education and health services. With respect to professional and business services, a more detailed examination of the three industry groups that make up this sector is conducted. The analysis focuses on eight California areas (four northern and four southern) that had total nonfarm employment of 750,000 or more in both 2008 and 2014. (3) The northern areas examined are San Francisco-San Mateo-Redwood City Metropolitan Division, Oakland--Fremont--Hayward Metropolitan Division, San Jose--Sunnyvale--Santa Clara MSA, and Sacramento--Arden--Arcade-Roseville Metropolitan Statistical Area (MSA). The southern areas are Los Angeles-Long Beach-Glendale Metropolitan Division, Santa Ana--Anaheim--Irvine Metropolitan Division, San Diego--Carlsbad--San Marcos MSA, and Riverside--San Bernardino--Ontario MSA. (4) The results offer an interesting perspective on different post-recession recovery patterns for the northern and southern California areas.

Background and Methods

Data from the Current Employment Statistics (CES) survey, conducted by the Bureau of Labor Statistics, are used to calculate employment recovery ratios--the ratio of employment in an industry at a given time compared with the industry's peak employment. (5) This analysis compares employment levels in January 2008 with those in January 2014. January 2008 was the month where nonfarm employment across the nation reached its peak. This data point serves as an adequate proxy for peak employment in the selected areas. The January 2014 end date allows for year-over-year comparisons of not seasonally adjusted data. (6)

Using the January 2014 and January 2008 data points, a recovery ratio is calculated to determine the percent of peak nonfarm employment recovered in the eight large California areas studied at selected supersector and detailed industry level. A value less than one indicates that January 2014 employment was below the January 2008 level. Conversely, a value greater than one signals that January 2014 employment was above the January 2008 peak. More precisely, a ratio of 1.06 would indicate 6 percent growth above the January 2008 level, whereas a ratio of .98 would show that the January 2014 rate was only 98 percent of January 2008 employment.

Results

The first step in the analysis requires calculating recovery ratios of the four selected sectors in each of the eight large areas studied. …

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