Oregon Office of Economic Analysis

Mike Rogoway at The Oregonian has written a great article summarizing some updated research on the state’s high-tech sector and how it has performed over the business cycle in recent years. There is quite a bit packed into the article including some really good nuggets of information from Mark and on the recent growth seen in the industry. As for a lot of the underlying research that went into the article, it can be found over on the Oregon Employment Department’s site and also the following post. Stay tuned for a follow-up post in the not-too-distant future on the development of the high-tech sector here in Oregon over time, why it happened and some additional thoughts and ideas on the outlook, both directly and indirectly from a policy perspective. The Governors Council of Economic Advisors has had a few discussion recently on the subject and I would like to share their thoughts and own research.

First off, the following post is designed to be complementary to the research article that Oregon Employment Department’s Jill Cuyler-Crook recently wrote. Jill dives into the detailed industry data, examining employment based on occupations and characteristics to define the overall high technology industry as the sum of 14 smaller sub-sectors. She uses a definition that is consistent with previous BLS work. Jill provides a great overview of the broader industry, including demographics and individual occupations, and I highly encourage you to read the whole thing, including a summary over on the Employment blog. What I have done to complement Jill’s work is provide some more details and also state comparisons of the high-tech industry.

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Using the same broader industry definition, this first graph takes a look back at the historical evolution of high technology employment in Oregon. Over the course of the 1970s and 1980s the industry steadily grew to around 60,000 by 1990, or about 5% of the state’s total jobs. During the 1990s and in particular during the second half of the decade the industry experienced tremendous growth (averaging 7.4% annually from 1994-2000). Of course this time period is associated not only with the technology ramp-up in the U.S. but also the dotcom bubble. Major investments were made in high technology at this time and numerous new companies received high valuations upon going public. As the bubble burst, sending stocks tumbling and the economy into a brief-from-a-GDP-perspective recession, employment in the broad industry plummeted over 23%, compared with losses of around 4% for the state as a whole. Much like the NASDAQ, employment in the industry has never fully regained the jobs lost during the 2001 recession, however employment has remained relatively stable as a share of the state’s jobs at 5-5.5% over the past decade. In terms of state GDP, the industry has a much larger footprint and really drives the state’s value-added production.

The high technology industry took a large hit during the Great Recession, seeing job losses of about 10% at the depths of the recession. The larger job losses when compared with the state as a whole are partially due to the fact that consumers retrench more on big ticket durable goods – like computers – than on essentials – like food and housing. However so far in recovery the industry has been adding jobs at a faster rate than the overall economy. In terms of growth the only standard employment sectors that have seen stronger percentage gains in recent years are natural resources, professional and business services and educational services. The industry is growing a bit quicker than manufacturing overall and leisure and hospitality, while sizably outpacing all other standard industries. However in recent months employment in high-tech has stagnated. Recent struggles in the PC market may be a factor as may be the federal sequestration. Overall, our office expects the industry to continue to add jobs and recover along with the economy.

The following table shows which of the sub-sectors within high technology have seen the job growth since bottoming out at the end of 2009. These are changes from December 2009 through March 2013. Note that semiconductors here is actually a slightly broader measure as it is semiconductors plus a few thousand jobs in electronic instrument manufacturing.

While the number of jobs has never regained the peak level reached in 2000, wages in the industry continue to climb. Initially, back in the late 1970s and early 1980s, wages in the broader high tech industry were not too different than the average wage across the state. Today, high tech wages are over $94,000 while the statewide average has barely budged in real terms, at a little over $44,000. As Jill notes in her article, nearly 40% of jobs in the industry require at least a four year degree to be qualified, which is one reason wages overall are so high — it takes a highly educated workforce to run these companies.

In terms of state comparisons, Oregon ranks 14th highest among all states in terms of the size of the high-tech sector based on employment in 2012. This is a notch above the U.S. average. Ranking 14th may come as a surprise to some — it did to me at first — given that we tend to think of ourselves as a high-tech state. However it is important to think about what types of technology we actually have here in Oregon, compared with what other sub-sectors are concentrated more heavily in other locations. For example, we know that Oregon has a higher concentration of manufacturing high-technology with the presence of Tektronix (more historically) and Intel (more recently), and the like.

When it comes to each of the sub-sectors that make-up high-tech, Oregon really has a significant concentration in two (semiconductors and software) relative to the rest of the nation. Oregon has about an average concentration in computer and equipment manufacturing, data processing and hosting services (data centers) and electronic instrument manufacturing. All other sub-sectors in Oregon make-up a smaller relative share of total employment than the national average. This even goes for computer systems designs and services, which shown above, accounts for nearly half of the high-tech growth in Oregon thus far in expansion. So while it is growing quickly — particularly in the custom software portion of this sub-sector — it is still relatively small today. (Software and custom software’s strong growth was also the focus of some previous research from Employment’s Amy Vander Vliet and Mike Rogoway wrote a nice article back in April on it.)

Knowing that we specialize more on the manufacturing side, I divided up the sub-sectors into two larger categories of hardware and software to see how Oregon ranks. Even though Oregon does well directly on software, in this broader context of software that includes the most of the other non-manufacturing sub-sectors, Oregon ranks 27th highest and below the U.S. average. On the hardware side, Oregon ranks above average and 7th highest among all states. Since the fallout of the 2001 recession, Oregon’s relative position in high-tech is largely unchanged year to year. Furthermore if one dives a little deeper into the data, Oregon does rank 1st among the states for semiconductors with 1.7% of our employment being in this sub-sector, compared with a U.S. average of 0.3%.

This post has been designed to provide some background and data on this broadly defined high-tech sector. Again, go read Jill’s work over on the Employment site and Mike’s write-up today in The Oregonian which includes better graphics that mine and also stay tuned for a follow-up on the why it happened here in Oregon and additional information on the outlook and policy prescriptions.