2006 the best year for Bay Area job growth since 2000

Chron 200
Hiring is up; offshoring, too back in business
Tech workers in demand: Silicon Valley companies are offering top wages, helping to make 2006 the best year for Bay Area job growth since 2000
Carolyn Said and Ryan Kim, Chronicle Staff Writers

Monday, April 9, 2007


The rising tide of the U.S. economy lifted the vast majority of Bay Area corporate boats in 2006. And local workers finally got a boost, too, as the region's technology resurgence began to yield job growth in high-wage occupations.

"In most sectors we're seeing high intensity -- employers looking to hire at faster and faster rates," said Jim Wunderman, chief executive officer of the Bay Area Council, which represents 275 local companies.

Job creation is up, albeit not at the rip-roaring pace of the dot-com days. Employers have boosted productivity and embraced offshoring to the point that no matter how healthy their bottom lines, they do not boost local head counts the way they used to.

"It was clearly the best year for the job market since 2000," said Stephen Levy, director of Palo Alto's Center for the Continuing Study of the California Economy. Employers in the nine-county Bay Area bumped their payrolls up 1.9 percent, according to Levy, adding 61,700 salaried jobs. "The stars (in job growth) were Silicon Valley and San Francisco," he said.

Several positive developments fueled that growth.

"It was the year technology had a renaissance based on good foreign-market sales," Levy said. "It was also the year that professional services and the Internet rebounded and foreign trade rebounded. Tourism and convention business rebounded. It was a really good year for the Bay Area. We kept pace with the state and outpaced the nation by a little bit."

Even better news on job creation was that much of the local growth was in high-paying jobs. In 2006, California added 47,000 jobs in professional and technical services, according to the state Employment Development Department.

"That's largely a Bay Area phenomenon in the tech side of the service sector in Silicon Valley," said Ryan Ratcliff, an economist with the UCLA Anderson Forecast.

Some of the biggest growth in those technical services was in computer design consulting -- "the people who tell you how to hook together all these new gizmos you bought and how to run your business around them," Ratcliff said. Computer systems design and management also saw solid growth.

"It's a nice hiring environment for people who are tech workers," said Anne Wenzel, principal economist with Econosystems, a Menlo Park economics and market research firm. "It's not the boom it was, but definitely solid."

Google Inc. has been on a torrid pace, adding bodies to help it expand and add new services. The search leader nearly doubled its workforce in 2006, growing from 5,500 to 10,768 employees.

The Mountain View company said its overseas growth rate has eclipsed its domestic expansion, although a majority of employees still reside in the United States.

Kannan Pashupathy, head of Google's international engineering operations, said there is still plenty of room to grow, especially as the company ramps up operations worldwide. He said many engineering teams are still small, in some cases three to five people.

"The industry is evolving rapidly, and we need people to work on all these projects," Pashupathy said. "We have lot of projects like Gmail and Google News, and as we deploy them internationally a lot has to be done to put out the products in new languages."

URS Corp., a San Francisco engineering design company, added 4,500 people last year, including 200 in the Bay Area. The company, which now has 29,300 workers, has ramped up to keep pace with additional projects, including California freeway expansions, levee repairs along the ravaged Gulf Coast and reconstruction work in Iraq.

Scotts Valley (Santa Cruz County) hard-drive manufacturer Seagate Technology Inc. added 7,000 employees last year, mostly through its acquisition of rival Maxtor Corp. of Milpitas. The merger pushed Seagate from 47,000 employees to 54,000 and added about 300 employees in the region.

"We were on a path to grow organically" because demand for digital storage is booming as consumers need space for music, photos and videos, Seagate spokesman Woody Monroy said. "This (acquisition) just gave us a path to do that faster."

Venture capital was up in 2006 to its highest level since the dot-com bust. That helped fuel jobs growth. "Usually what companies do when they get these (venture) investments, is (use it as) working capital and expand staff," Wenzel said. "It's a really good sign for hiring when it goes up that high. There's a direct correlation between job openings and funding of these companies."

Despite all the positive economic indicators, 2006 was also the year that the once-hot housing market underwent a slump, both locally and nationally. Experts are still divided on whether real estate has hit bottom.

Wenzel said the Bay Area, where housing is in tight supply and employment remains high, is largely insulated from some of the worst effects of the housing downturn.

Increases in commercial construction have helped offset declines in residential construction, and the billions of dollars California is poised to spend on infrastructure will continue to keep construction workers employed.

Subprime mortgages, an area of major concern nationally, are a relatively minor phenomenon in this affluent area. Subprimes are issued to borrowers with poor credit and have grabbed headlines lately as those borrowers start to miss payments, risking foreclosures.

"We just don't have as much of a problem" with subprimes, she said. "It will be such a small percentage of overall households" in the Bay Area.

What about the Bay Area outlook for 2007?

Positive -- but according to Levy, "I think the companies will have slower growth in revenue and profits.

"We will be less affected by the (national economic) slowdown than other regions because we have a higher share of companies that do business overseas and we're a little insulated from the housing market. I don't think we'll be anywhere near the 1.9 percent (jobs) growth we did in 2006, but we may be one of the better-performing regions in the state because of technology."

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This article appeared on page E - 9 of the San Francisco Chronicle