A reckoning with budding parallels to the Dotcom Bubble & Bust, while other sectors continue to grow. Unemployment rate rose to 3.9%.
By Wolf Richter for WOLF STREET.
In San Francisco and the northern part of Silicon Valley, one of the epicenters of tech jobs in the US, has seen large scale declines of jobs in tech, social-media, and finance since the end of the pandemic hiring boom in mid-2022 despite the AI-related hiring boom.
And August made it a lot worse with large month-to-month drops of jobs in Information (-1.2%) and in Professional, Scientific, and Technical Services (-1.1%), according to the Establishment Survey by the Bureau of Labor Statistics for the metropolitan division “San Francisco-Redwood City-South San Francisco,” which spans San Francisco County and San Mateo County. The data was released on Friday.
Even growth in other segments – such as Healthcare; Leisure & Hospitality; Education; Other Services; and Trade, Transportation, and Utilities – has not been able to make up for the sharp declines in the tech and social media-rated jobs.
Jobs in the Establishment Survey are tracked by business location, regardless of where the worker lives. If a worker commutes from the East Bay to an office in San Francisco, it counts as a job in San Francisco, though the worker lives elsewhere. Same with remote workers. An employee assigned to an office in San Francisco but working remotely somewhere else counts as a job in San Francisco. Conversely, workers who live in San Francisco but are assigned to an office somewhere else count as jobs at those locations, and not in San Francisco.
So a large portion of these jobs that got cut could have been remote workers — people living somewhere else — but not all because the overall unemployment rate of people who actually live in the metro also rose. More in a moment.
Information: -1.2% in August from July; -8.2% year-over-year; -20% (-26,100 jobs) from the peak in August 2022, down to 105,300 workers, the lowest since January 2020.
The sector includes facilities where people primarily work on web search portals, data processing, data transmission, information services, software publishing, motion picture and sound recording, broadcasting including over the Internet, and telecommunications.
This sector still accounts for over 10% of private sector employment in the metro, but down from a share of 12.5% in mid-2022. It plays an outsized role in the metro: In the US overall, it accounts for only about 2% of total nonfarm payrolls.
The chart goes back to 1998 to encompass the effects of the Dotcom Bubble and Bust. The bubble was swift, the bust was long. By the time it was all said and done in 2011, eleven years after the bust began, the Information sector had lost 45% of its jobs! That was more than double the rate of the job losses so far (20%).
This time around, the hiring boom was long and huge and culminated with a helter-skelter hiring frenzy – instead of mass layoffs – during the pandemic when workers were hired to work remotely doing who knows what, perhaps multiple full-time jobs simultaneously, because companies were losing control during the frenzy.
Then reality re-cropped up in mid-2022, and companies began to shed the excesses, famously Twitter, headquartered in San Francisco, which fired over half its global staff and thousands of contractors in one fell-swoop after Elon Musk took over.
Professional, Scientific, and Technical Services: -1.1% in August from July; -3.4% year-over-year; -8.1% (-18,200 jobs) from the peak in June 2022, down to 211,100 workers, the lowest since August 2021.
This sector accounts for about 21% of total employment in the metro. It includes legal advice and representation; accounting, bookkeeping, and payroll services; architectural, engineering, and specialized design services; computer services; consulting services; research services; advertising services; photographic services; translation and interpretation services; veterinary services; and other professional, scientific, and technical services.
The Dotcom Bubble and Bust are also apparent here. The Bust took out 28% of the jobs in Professional, Scientific, and Technical Services – the entire number of jobs that had been added during the last two years of the Bubble, plus some. But given how much broader the sector is, it recovered much faster than Information.
Financial Activities: Since the peak in 2001, employment in the sector is down by 20%, with a big trough in between.
Since the mini-peak in August 2022, employment has fallen by 6.1%. In August, employment ticked up by 0.3% from July, to 80,800 jobs.
The big financial exodus started in 1998 when NationsBank, headquartered in North Carolina, acquired BankAmerica, headquartered in San Francisco. The combined bank changed its name to Bank of America and was headquartered in North Carolina. Over the years, the activities in San Francisco were moved to North Carolina. So that was that.
Wells Fargo is still headquartered in San Francisco, but it has many employment centers around the US, and has been building a major campus in Texas to open in 2025. Rumors have been flying for years that it would move its headquarters out of San Francisco. In October 2022, the San Francisco Business Times reported that no one from the bank’s 17-member “senior leadership team” was still based at the headquarters in San Francisco. Employment at its headquarters has been shrinking for years. In June 2023, Wells Fargo sold a 13-story office tower near its headquarters building at 60% below its 2005 purchase price.
Charles Schwab, which used to be headquartered in San Francisco, and had spent years trimming its staff in the City, announced in 2019 that it would move its headquarters to a new campus in Texas, confirming years of rumors that it would leave San Francisco. And it made that move in 2021.
Then, in the spring of 2023, two regional banks failed that the tech and startup scene had relied on – Silicon Valley Bank, headquartered in Santa Clara (not part of this metro), and First Republic, headquartered in San Francisco. First Citizens bought some of the assets of SVB and assumed all customer deposits from the FDIC, and began operating the SVB branches. JPMorgan acquired some of the assets of First Republic and assumed all of the deposits and has been trying to retain its clients.
Overall private-sector nonfarm jobs: -0.3% in August from July; roughly unchanged year-over-year; -3.4% from August 2022 which had been the recent high; and -5.6% from the peak in February 2020, to 1.01 million jobs.
Government jobs — such as teachers, first responders, and employees of the federal government — are excluded here from this measure of private-sector jobs. They account for 12% of total jobs in the metro, compared to 14.7% for the US overall.
The big plunge during the pandemic occurred when jobs in Leisure & Hospitality, Retail, and other sectors subject to lockdowns suddenly vanished, even as Information spiraled into a hiring frenzy of remote workers:
Unemployment rate: The above data of nonfarm jobs is based on the Survey of Establishments by the BLS, tracking jobs by the business location the workers are assigned to, though these workers may not live in the area; they may be working remotely or commute.
But the unemployment rate is based on the Household Survey by the BLS that tracks employment and unemployment by the location of the household.
The unemployment rate in the San Francisco-Redwood City-South San Francisco metropolitan division jumped to 3.9% in July, the latest data available from the BLS, up from 3.6% in June, and back where it had been in January this year. Roughly 38,700 people who live in the metro and didn’t have a job were actively looking for a job.
This 3.9% is high for local conditions, higher than it had been in 2022 and in 2018 and 2019, when it ranged from 2% to 3%. But it is still lower than the overall US unemployment rate of 4.2%.
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1st! See how easy :)
🏆
👍 Now add something smart?
OK! (while also picking up an easy second as Wolf doesn’t count position-wise…has unfair advantage) I’ll try, but not too good at what is smart lately.
I sure hope the tech workers (and mgrs) at JBL and related tech companies and suppliers (the company which offers this very useful option for many newer cars) don’t lose their job because some people don’t order this interior sound package with their new car…..or dealers/manufacturers don’t order/make standard cars with nothing but this “feature”, since everyone wants it* so bad.
*Engine Sound Enhancement (ESE) is standard on Touring and available on XSE as part of the JBL ® Audio upgrade. This is a combination of an Intake Sound Generator (ISG) and sport-tuned exhaust working with the Active Noise Control (ANC) system to cancel out unwanted noise in the cabin while simultaneously pumping in a deeper and sportier exhaust note.
This referred to a Toyota Avalon, I think, but I’m sure you can get it on your favorite brand, or other Toyota models. Really enhances driver experience, especially when making a clever move (requiring power) to pick up a car length on a fellow freeway race driver.
Hi wolf,
How much of these IT job losses can be attributed to off-shoring to low cost arbitrage countries.
I know what Wolf is going to say …..RTGDFA :)
Jobs in the Establishment Survey are tracked by business location, regardless of where the worker lives
👍🤣❤️
maybe some of these UNEMPLOYED can learn new skills and become part of the much needed new generation of service workers
you know actually perform real work
From what I can see, relatively few of the jobs were lost to off-shoring. Instead you have a small number of very large companies (Alphabet/Google, Microsoft, Facebook/Meta, and Amazon) that had massively over-hired and woke up to the fact that it was costing them a bundle of money.
Add in the post-acquisition layoffs (Microsoft/Activision, for example) and you have a large percentage explained.
Other factors: The self-driving car/truck mania has largely ended. There were dozens of startup companies playing in this space, and almost all of them have shut down and fired all their people. GM’s Cruise is still operating, but with half as many people as they had two years ago. Alphabet’s Waymo has had multiple layoffs.
Also ending: The blockchain / cryptocurrency / Web3 mania. Dozens of startups in this space have all expired at about the same time.
Honorable mention to the Fintech sector which has had several high-profile failures in the last year. Turns out running a bank is HARD and giving it a website in place of physical location doesn’t make it measurably easier.
The AI mania just hasn’t been big enough to make up for all of the recent bloodshed in the tech sector.
Waymos are all over the place here in San Francisco, transporting paying customers (tourists!!!) to go somewhere in an autonomous Jaguar. It’s not ending. It’s just getting started as a functional commercial business to replace Ubers and taxis driven by humans. Waymo is expanding its reach to other cities, to expressways, etc. This is just the beginning. But over the years, it will wreak havoc on driver jobs.
Also ending metaverse.
For all these manias, I gave 👎 from their start.
AI seems real, at least in the long run. Over a yeah ago I exited corporate software development. I enjoyed actual coding, and AI killing the fun there.
5 years ago the new kiosk bots started replacing low income workers who were not showing up and hard to find because of the low pay
predicted 40-60% of those jobs were going to vanish in 10 years
tic tock 1/2 done with other half coming
guess their going to need more people to clean up the streets with new druggies coming out to play
Agree CE.
But all that sensor tech and the situational algorithms and control algorithms produced a LOT of tech and technicians (and engineers) for the drone (all sizes shapes) business…..which is not becoming a good thing IMHO…..and from what I hear.
I work in this industry for one of the Big 50.
Positions are not eliminated but geo shifted to low cost location.
Tech biz need to show cash flow. that didnt exist with free money
Now if more companies find it advantageous to depart the area, or lay off employees, could be the high taxes, cost of living….nothing new, just more people leaving California to be replaced by hard working migrants. No complaints, it’s a good day to not live in California…to expensive for me anyways. I live like a cheap dog in small-town Arizona, funny thing is I think I’ve got it good.
” just more people leaving California to be replaced by hard working migrants.”
LOL, as “Aman” above said at 3:26 pm
“I know what Wolf is going to say …..RTGDFA :)
“Jobs in the Establishment Survey are tracked by business location, regardless of where the worker lives”
I’m not as guilty as might be, I was actually looking only at California’s population decline not at the RTGDMFA crime.
Still a fine dispensary across the border.
Wonder how many of these are losses related to retirement or buyouts with positions not being added back in? This sector is younger than IT people that work in other sectors but I am sure still those exiting for retirement or simply a new chapter in life.
around 10,000 per day are retiring/turning 65 or 3.65 million per year
taking countless skills and experience
not seeing lots of youngins filling their jobs
I’m contemplating though I’m couple years out for that magic age
don’t care much anymore
but have so much work, with customers throwing more at me knowing my time is short
they routinely ask if I have transition plan for them – likely going to sell my company and walk
Now you see that the red lights of crises were serious and the dooms day is coming or do you still believe that those lights that have been flashing for so long will never turn into a real crash?
Not sure this foretells anything other than California is a difficult place to headquarter a business.
Doesn’t bode well for revenue for the state for sure. Next few budget cycles will be interesting. Perhaps good revenues will recent uptick in market since capital gains an important source of revenue. Not that it is the lions share but super volatile and can vary from around 2% to 14%. $155 billion swing between adjacent years. Difficult when you pass laws and programs based on unpredictable revenue.
Feels like the whole tech worker binge after the pandemic is like a bunch of billionaire’s company DxxK measuring contest….look at me, look at how many workers I can horde compare to your company..blah blah…
Now that the experiment is effectively over, as always, others get to hold the bags while the people in charge walked away just fine and in fact cashed in on their own stock at the top…good times.
truer words rarely spoken
Indeed, and I think the AI unicorn is another excuse to layoff employees due to weakening business while propping up their stock price. Like the old 80s commercial “where’s the beef (product)?” Biotech has been shedding jobs like a bad vaccine for years now, lol.
Was just reading about how San Diego is cooked too. Was once a great city and now it’s an overpriced parking lot.
Can confirm.
Live in San Diego and people want SF prices for housing out in the Southwest dirt. Traffic everywhere and generally not worth the price. Home prices blew up with remote tech workers chasing cheaper housing than SF.
Hooli and pied Piper shedding the dead weight
Yes, there’s some of that. A lot of it. The Hiring Frenzy into mid-2022 was a terrible waste.
haha love that show…although as ridiculous as some of the characters are in that show, sadly IRL billionaire tech bros like Musk is making that show tame by comparison
“In October 2022, the San Francisco Business Times reported that no one from the bank’s 17-member “senior leadership team” was still based at the headquarters in San Francisco. Employment at its headquarters has been shrinking for years.”
This is good news. They are all over the DC area. I’d like to see their senior leadership team shrink to ZERO. Since they took over Wychovia in 2009 during the financial crisis they’ve destroyed any and all relationship with the legacy depositors and customers that they inherited. I am one of them. Wychovia was a well run bank, unlike Wells Fargo which can not manage its way out of a wet paper bag. After 2 years I am finally close to liquidating all my personal financial relationships with them except for a small business account. That account will be kept open because it will cost me too much to close it out than keep it for now. I’m getting rid of my VISA card with them as soon as I can verify that all pending charges have been cleared out.
The granddaddy of Tech employers ( as far as strategic importance Intel, is in the middle of layoffs, as has been reported. Right now they are encouraging as many as possible to take severance packages voluntarily. I don’t believe these “retirements” show up on job loss numbers. Next month they start the involuntary layoffs.
RTGDFA. This gets exhausting. This is the third one. These figures are reported by businesses – how many workers are assigned to this business location. It counts the workers on the payroll at that location. If they’re not on the payroll, it doesn’t matter why they’re no longer on the payroll, they’re no longer counted, good grief!!!
Raise money. Spend it in a grand manner. Repeat till Hindenburg Research takes short position. AI will solve all problems by reformatting text on the internet and turning it into pleasantly voiced speech. Secrete algorithm turns pontification into intelligence. Spell and speak instead of speak and spell.
Gen X (1965/1980) workers are protected from age discriminations.
HR layoff packages are good to go. They mix it up : a few gen X with young workers to protect themselves from lawsuits. The cost of gen X packages is much higher than young employees, who might be sacked for no fault of their own. Senior gen X will start retiring soon. Millenials and gen alpha will take over. Gen alpha is 30M smaller than the boomers.
I worked in the bay area for Biotech for a decade, left in February of 2001. The Biotech company is sill there, and still profitable, but happy I left when I did. I can see the value in biotech, but not social media. As far as I can tell they are all over educated flim-flam men and women.