New Data from U.S. Census Shows (Mostly) Broad and Steady Employment Growth, Highlights Changing Nature of Bay Area Economy

The latest U.S. Census data from the 2016 County Business Patterns series shows continued overall growth for the nine-county Bay Area in employment as well as the number of business establishments. While the news is mostly good, the data also reveals some soft spots, and further highlights some of the disparities that have developed between different parts of the Bay Area, as well as between different industries.

In this post, we’ll take a deep dive into the latest data to look at:  

• Bay Area Employment, or the number of employees as of the First Quarter of a given year, and
• Bay Area Business Establishments. 

This data will be broken down by County, Bay Area Subregion, and Industry Sector. Data will be presented from 2005, 2015 and 2016. Tables will be followed by discussion and comments. For more information on the County Business Patterns annual release, visit the data series page the U.S. Census website.

Bay Area First Quarter Employment by County: 2005, 2015, 2016

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• From 2015 to 2016, the overall number of employees in the Bay Area grew by 2.2 percent, an increase of over 72,000 paid employees. This was slightly faster growth than California as a whole (1.9 percent), but less than the fastest growing U.S. states – Florida (5.0 percent) and Arizona (3.7 percent). 
• The largest numeric gains between 2015 and 2016 were in Santa Clara, Alameda, San Francisco, and Contra Costa counties. On a percentage basis, the largest growth was in Solano, Contra Costa, Alameda, and San Francisco counties where growth was around three percent. By contrast, there was a decrease in the number of employees in San Mateo County, and only very modest or insignificant growth in Napa and Marin counties. 
• For San Francisco, the 2.7 percent employment growth between 2015 and 2016 represented a significant slow-down from 2014 to 2015, when employment expanded by 6.6 percent – highest in the nation.  Among the top 50 U.S. counties with the most employees, the top three for employment growth were Wake County, N.C., Kings County, N.Y., and Bexar County, Texas, where growth ranged between 4.4 percent and 5.2 percent. 

Bay Area First Quarter Employment by Subregion: 2005, 2015, 2016

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• Looking on a subregional basis over a longer time horizon (from 2005), you can see a clear geographic difference in the composition of employment growth over the last 10+ years. Employment growth has been significantly larger on a numeric and percentage basis in the South Bay (Santa Clara County) and San Francisco + Peninsula (San Francisco and San Mateo counties – although technically San Francisco accounted for almost all of this growth) compared to the East Bay (Alameda and Contra Costa counties) and North Bay (Marin, Napa, Solano and Sonoma counties). 

Difference in Employment Share by Bay Area Subregion: 2016 vs 2005

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• This above-mentioned geographic shift is further apparent when viewed on a distributional basis. As seen here, the South Bay and San Francisco + Peninsula increased their share of the Bay Area’s overall employment from 2005 to 2016. These two subregions accounted for nearly 60 percent of all Bay Area employees as of 2016, compared to approximately 56 percent of all employees in 2005. By contrast, the share of total regional employment has declined in the North Bay and East Bay, with an employment share decline of over two percent for the East Bay. 
• While not an overwhelming shift, this does line up with recent observations (anecdotal and otherwise) regarding increasing employment concentration in the region’s core employment centers.

Number of Bay Area Business Establishments by County: 2005, 2015, 2016

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• From 2015 to 2016, the overall number of business establishments in the Bay Area expanded by 1.1 percent, or over 2,000 businesses.  This growth was broadly spread across the Bay Area, with the largest numeric increase in Santa Clara County and the largest percentage increase in Solano County. Marin County saw the slowest business expansion in both numeric and percentage terms. 
• An interesting feature of this data is that employment has been growing at nearly twice the rate of business establishment. Over the last 10+ years, the average number of paid employees per business establishment has crept up, from about 16.3 to 17.1. This could align with other recent evidence of slowing business formation and increasing concentration of employment in larger firms.

Number of Bay Area Business Establishments by Subregion: 2005, 2015, 2016

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• Similar to the employment data, looking at business establishment growth on a subregional basis over a longer time horizon (from 2005) shows clear geographic differences in the composition of growth over the last 10+ years. Again, business establishment growth has been significantly larger on a numeric and percentage basis in San Francisco + Peninsula and the South Bay compared to the East Bay and North Bay. Over a 10+ year period, there has been essentially no net growth in the number of business establishments in the North Bay (as seen in the previous chart, Napa was the only bright spot among the four North Bay counties).

Difference in Business Establishment Share by Bay Area Subregion: 2016 vs 2005

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• Again, the data shows a clear geographic shift in the distribution of business establishments across the Bay Area. San Francisco + Peninsula and the South Bay have increased their share of the overall number of Bay Area business establishments, while the East Bay and North Bay have lost share.
• Interestingly, from 2005 to 2016, the South Bay increased relative employee share by the most while San Francisco + Peninsula increased relative business establishment share by the most. By contrast, from 2005 to 2016, the East Bay lost the most ground on relative employee share while the North Bay lost the most ground on relative business establishment share. 

Bay Area First Quarter Employment by Industry Sector: 2005, 2015, 2016

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• As can be seen, from 2015 to 2016 the largest numeric increases in employment by Industry Sector occurred in Professional Services, Management and Healthcare. On a percentage basis, in addition to the former two, the largest increase occurred in Construction employment, which expanded by close to 7 percent. By contrast, on both a numeric and percentage basis, the largest employment decreases occurred in Mining, Wholesale Trade, and Administrative and Support and Waste Management Services. 
• The largest Industry Sectors in the Bay Area by total employment as of 2016 included Health Care, Professional Services, Accommodation and Food Services, Retail, and Information. Interestingly, Retail employment barely grew from 2015 to 2016.
• In several key Industry Sectors, total employment was still lower in 2016 compared to 2005, including Real Estate, Construction, Finance and Insurance, and Manufacturing, despite the fact that overall employment grew by nearly 370,000 over the same period.  This highlights not only the ongoing transformation of the regional economy in a more service-oriented direction, but also a changing labor market and lasting scars from the Great Recession. 

Number of Bay Area Business Establishments by Industry Sector: 2005, 2015, 2016

Source: U.S. Census County Business Patterns: 2005, 2015, 2016

Discussion

• Changes in the regional economy can also be seen in the business establishment data. Over the period from 2005 to 2016, the largest increases in the number of business establishments occurred in Professional Services, Accommodation and Food Services, Health Care, and Education Services. By contrast, the largest contractions in the number of business establishments occurred in Retail Trade, Wholesale Trade, Manufacturing, Finance and Insurance, and Construction. 
• Between 2015 and 2016, the data shows some “perkiness” in the Construction and Real Estate sectors, with growth of approximately 2 percent and 2.4 percent, respectively. 

All of this data will be explored in greater detail in the next release of Economic Indicators from Vital Signs, MTC and ABAG’s regional performance monitoring initiative. In addition, expect more in the near future from the MTC and ABAG Economic Development team on strategies the Bay Area may pursue to address some of the ongoing regional disparities identified in this post. 

Disclaimer: This is a preliminary analysis subject to further refinement and revision. Per the U.S. Census County Business Patterns release: “Data in [these tables] represent those available when this report was created; data may not be available for all NAICS industries or geographies. Excludes most government employees, railroad employees, and self-employed persons.”