The West Coast, once a hub of technological innovation and economic growth, is now feeling the economic chill of a tech downturn, as reported by Gabriel T. Rubin and Christine Mai-Duc in an article for The Wall Street Journal (WSJ) on June 5, 2023. The ripple effects of this downturn are being felt by workers and businesses across various industries, from janitors and teachers to restaurants and dry cleaners in California, Oregon, and Washington, according to the WSJ report.
As per the WSJ, the tech sector, which had been a driving force of economic growth in these states, has seen tens of thousands of layoffs and other cost-cutting measures since mid-last year. The fallout from these actions includes higher unemployment, falling wages, strained state budgets, and slower job growth. In April, California had the nation’s second-highest state unemployment rate at 4.5%, Washington tied for third at 4.3%, and Oregon was close behind at 4%, as reported by the Labor Department.
The WSJ report indicates that the layoffs have not only been from tech giants like Microsoft and Facebook’s parent company, Meta Platforms, but also from other businesses that had thrived on these companies’ related spending. The downturn has extended beyond the tech sector, affecting construction and housing industries, as Scott Anderson, chief economist for Bank of the West in San Francisco, noted in the WSJ article.
The Federal Reserve’s interest-rate increases to combat high inflation have also played a role in cooling demand for big-ticket purchases, such as homes, industrial machinery, and household appliances, leading to stagnation in finance, manufacturing, and retail payrolls, as per the WSJ.
According to Labor Department data cited by the WSJ, the tech downturn has led to a significant drop in average wages in areas where high-paying tech jobs are concentrated. San Francisco County experienced the largest drop in weekly wages, 22.6%, of any large county in the country last year. Seattle’s King County, Washington, saw a 5.4% decline, and Washington County, Oregon, home to the state’s tech cluster, ranked 319th, with a 4.3% decline.
The economic downturn is also impacting state budgets. California’s Governor Gavin Newsom’s office estimated the state’s budget deficit at $32 billion in May, a sharp reversal after a historic $102 billion surplus in the past two fiscal years, as reported by the WSJ. According to the WSJ, Oregon is facing a similar crunch due to troubles at tech companies like Intel, one of the state’s largest employers.