Regional Report August 2009 1

RegionalReport

SUMMARY 09-08 AUGUST 2009 U.S. BUREAU OF LABOR STATISTICS

After the Dot-Com Bubble: 

Silicon Valley High-Tech Employment 

and Wages in 2001 and 2008

Authors: 

Amar Mann 

Regional Economist 

San Francisco Regional Offi ce

mann.amar@bls.gov

Tony Nunes

Economist

San Francisco Regional Offi ce 

nunes.anthony@bls.gov

Between 2001 and 2008, the 

Silicon Valley underwent a 

transformation. Following 

the peak of the high-tech boom, 

employment in Silicon Valley 

high-tech industries declined by 

about 17 percent, representing 

a loss of slightly more than 

85,000 jobs; however, average 

wages grew by nearly 36 percent 

in these industries during the 

same period.1

 Moreover, some 

industries grew in terms of their 

relative concentration in the local 

economy, while other industries 

shrunk.

Of the 11 industries analyzed 

in this report, 8 experienced 

employment declines and 3 

industries—pharmaceuticals, 

aerospace, and scientifi c 

research—exhibited employment 

growth during the 2001 to 2008 

period. Although the total 

number of high-tech jobs was 

down in Silicon Valley, the 

local concentration of jobs 

in a majority of its high-tech 

industries rose relative to the 

Nation as a whole.

For this report, 11 industries 

have been identifi ed as “hightech” using the 2007 North 

American Industry Classifi cation 
2 Regional Report August 2009

System (NAICS)2 codes. An 

industry is considered high-tech 

if “technology-oriented workers” 

within an industry, as identifi ed 

by occupational staffi ng patterns, 

account for approximately 25 

percent or more of total jobs 

within the selected industry.3

 

Due to recent revisions in the 

2007 NAICS codes, employees 

in Internet publishing and Web 

search portals, data processing, 

cable and program distribution, 

and telecommunications have 

been aggregated under one 

industrial classifi cation. Applying 

this methodology, 11 industries 

are identifi ed as high-tech.

Recent Economic History

“Silicon Valley” has been a 

globally recognized center of 

technological innovation since 

the 1970s, when technology 

fi rms engaged in semiconductor 

manufacturing, computer design, 

and computer programming 

and services symbiotically 

clustered in the southern portion 

of the San Francisco Bay Area. 

Th e silicon in Silicon Valley 

refers to the key ingredient of 

semiconductors, which formed 

the technical basis for the 

computer-based high technology 

economic climate that grew up 

surrounding San Jose, California, 

which is in Santa Clara County. 

Th is area and that industrial base 

attracted venture capitalists, 

computer technologists, and 

entrepreneurs to create a regional 

agglomeration of high-tech fi rms 

that spread into neighboring 

Bay Area counties (specifi cally, 

Alameda, Contra Costa, San 

Francisco, San Mateo, and Santa 

Cruz) and made Silicon Valley 

synonymous with technologydriven growth. (See map 1.)

From the mid-1990s to 2001, 

the new Internet sector, along 

with its related high-tech 

industries, rapidly grew, due in 

large part to widely available 

venture capital, and created a 

new wave of growth in Silicon 

Valley. Stock markets, such as 

the NASDAQ on which many 

high-tech corporations are listed, 

experienced huge run-ups in 

stock prices. In March 2000, 

the NASDAQ reached a peak of 

5,132.52.

By December 2000, the 

NASDAQ had dropped by more 

than 50 percent and stood below 

2,500. Despite such a massive 

hit to the market capitalizations 

and fi nancial projections for 

high-tech fi rms, employment in 

the Silicon Valley was stalwart 

in the early part of 2001. Santa 

Clara County’s unemployment 

rate stood at just 3.0 percent 

in January 2001. Nevertheless, 

the aftershocks of the 2000 

stock market crash and the 

onset of economic recession 

in March 2001 resulted in a 

sudden contraction of the Silicon 

Valley economy. As the bubble 

burst, Santa Clara County’s 

unemployment rate jumped to 

7.0 percent by the end of 2001, 

and the region’s future as a 

crucible of innovation appeared 

in doubt.

Following the 2001 economic 

downturn, high-tech industries 

in the Silicon Valley recovered 

at a slower rate than in the 

rest of the Nation. Some hightech companies responded by 

relocating certain phases of 

production elsewhere or moving 

from the Silicon Valley altogether 

to areas with lower commercial 

rents and housing costs.4

 By 2004, 

though, high-tech employment 

began to rebound in the Silicon 

Valley, and by 2008, some hightech industries like aerospace, 

pharmaceuticals, and scientifi c 

research had added enough jobs 

to exceed their pre-recession 

employment levels. Despite the 

signs of growth in recent years, 

Silicon Valley high-tech industries 

overall employed 17 percent 

fewer workers in 2008 compared 

with 2001. Nationally, high-tech 

jobs grew by 4 percent from 2001 

through 2008.

Still, the Silicon Valley has 

remained important in terms 

of not only the number of jobs, 

but also the number of jobs 

paying high wages. During 

2008, the high-tech industries 

generated $57.7 billion dollars 

in wages in the Silicon Valley. 

Th at amount was nearly 14 

percent greater than the total 

wages earned in these industries 
MAP 1. Distribution of high-tech employment in Silicon Valley by county, in 2008

Santa Cruz

1.0%

Contra Costa

5.0%

Santa Clara

54.8%

San Francisco

Alameda

San Mateo 15.6%

14.4%

9.2%

San Jose

Regional Report August 2009 3
Computer system design

Semiconductor manufacturing

Scientifi c research

Internet, telecommunications, data processing

Architecture

Computer equipment manufacturing

Control instrument manufacturing

Software publishers 

Pharmaceuticals

Aerospace

Communication equipment manufacturing

0 20,000 40,000 60,000 80,000 100,000 120,000

CHART 1. Employment in Silicon Valley high-tech industries, 2001 and 2008

Number of employed

in 2001. Furthermore, the 

concentration of workers in 

high-tech industries remained 

at high levels, and average wages 

rose in every high-tech industry 

examined between 2001 and 

2008. Silicon Valley also continues 

to be at the cutting edge of 

innovation. According to the U.S. 

Patent and Trademark Offi ce, in 

2008, 11 of the top 20 U.S. cities 

with the most registered patents 

were in the Silicon Valley.

Today, the six Silicon Valley 

counties5

 encompass clusters of 

high-tech innovators and are home 

to large concentrations of businesses 

in the interconnected fi elds of 

computers, electronics, multimedia, 

and biotechnology. Although six 

counties are identifi ed as part of the 

Silicon Valley high-tech corridor, 

more than half of all high-tech jobs 

were located in Santa Clara County 

alone. 

Employment

All high-tech industries had 

signifi cant representation in the 

local area: employment ranged 

from 99,224 jobs in the computer 

system design industry down to 

11,583 jobs in the communication 

equipment manufacturing 

industry in 2008.

Although 8 of the 11 industries 

analyzed experienced employment 

declines, 3 industries—scientifi c 

research, pharmaceuticals, 

and aerospace —exhibited 

employment growth from 2001 to 

2008. (See chart 1.) During this 

period, overall Silicon Valley hightech employment fell by around 

85,000 jobs to 435,826 jobs.

Employment Concentration

Several Silicon Valley high-tech 

industries expanded between 

2008

2001

4 Regional Report August 2009
2001 and 2008 in terms of 

employment concentration 

and signifi cance in the Silicon 

Valley economy. One statistical 

measure of the concentration of 

a local industry is the location 

quotient. Location quotients 

(LQs) are ratios that compare 

the concentration of industry 

employment in a defi ned area 

to that of a larger area or base. 

For example, LQs can be used 

to compare the proportion of 

the Silicon Valley workforce 

employed in high-tech with 

the proportion of the national 

workforce employed in hightech. An industry with an LQ 

greater than 1.0 employs a greater 

concentration of workers locally 

relative to the national share.6

 

Th e LQ for high-tech employment in the Silicon Valley was 

3.2 in 2001, indicating that 

high-tech employment was 

concentrated at more than three 

times the national average. 

Although the Valley’s high-tech 

LQ declined to 2.8 in 2008, 6 

of the 11 high-tech industries 

actually had increased their LQ 

since 2001. (See table 1.) 

Of the 6 industries with increased 

LQs in 2008, 3 actually lost jobs 

over the 6-year period. LQs rose 

for manufacturing of computer 

equipment, communications 

equipment, and semiconductors in 

the Silicon Valley, as job losses in 

these industries were less severe in 

the local area than the rest of the 

Nation.

Employment concentrations and 

trends can also be demonstrated 

visually using a bubble chart. 

(See chart 2.) Th e size of each 

bubble represents the industry’s 

2008 employment level—a 

larger bubble indicates more 

employment. Industries in 

the upper right quadrant are 

growing both in employment 

and in relative concentration in 

Silicon Valley and thus are the 

potential “emerging leaders” of 

the area’s economy. Th ose in 

the upper left-hand quadrant, 

while declining in terms of jobs, 

are growing in terms of relative 

local importance. Th ese might 

be labeled the “survivors” from 

the original hardware-oriented 

Silicon Valley. In the lower left 

quadrant are industries that have 

lost both employment and relative 

share. Most notable among 

these “sliders” is the Internet, 

telecommunications, and data 

processing cluster of industries. 

(Note that location quotients 

range from about 1 for aerospace, 

architecture, and the Internet, 

telecommunications, and data 

processing cluster to more than 

10 for computer equipment 

manufacturing.)

Among the top four hightech industries in terms of 

Regional Report August 2009 5

TABLE 1. Employees and location quotients by industry, Silicon Valley, 2001 and 2008

Industry Employment

2001

Employment

2008

Change from 2001 to 

2008

Location quotient

(LQ)

 Silicon Valley high-tech industries 521,963 435,826 –86,137 –16.5 3.2 2.8

Computer system design 107,163 99,224 –7,939 –7.4 3.4 3.0

Semiconductor manufacturing 87,424 57,490 –29,934 –34.2 5.5 5.9

Scientifi c research 40,756 51,361 10,605 26.0 3.1 3.7

Internet, telecommunications, data processing 67,317 49,810 –17,507 –26.0 3.1 1.9

Architecture 49,897 43,032 –6,865 –13.8 1.6 1.3

Computer equipment manufacturing 57,833 42,893 –14,940 –25.8 8.1 10.4

Control instrument manufacturing 39,710 27,541 –12,169 –30.6 3.4 2.8

Software publishers 32,801 25,661 –7,140 –21.8 4.9 4.3

Pharmaceuticals 11,189 14,728 3,539 31.6 1.6 2.3

Aerospace 8,349 12,503 4,154 49.8 0.7 1.1

Communication equipment manufacturing 19,524 11,583 –7,941 –40.7 3.3 4.0

 Number Percent 2001 2008
employment in Silicon Valley in 

2001—computer system design; 

semiconductor manufacturing; 

Internet, telecommunications, and 

data processing; and computer 

equipment manufacturing—

more than 70,000 jobs had 

disappeared by 2008. However, the 

concentration of employment in 

two of these industries—computer 

equipment and semiconductor 

manufacturing—increased locally 

relative to the Nation.

Wages

Average annual wages in hightech rose sharply between 2001 

6 Regional Report August 2009

and 2008 compared with overall 

average wages in the Valley. For 

the Silicon Valley, the average 

annual wage in high-tech 

industries rose from $97,344 

in 2001 to $132,351 in 2008, an 

increase of 36.0 percent. (See table 

2.) In comparison, average annual 

wages rose only 21.7 percent 

across all establishments in the 

area. All high-tech industries 

experienced strong average wage 

growth over the period including 

scientifi c research (72.1 percent) 

and aerospace (72.0 percent) and 

pharmaceuticals (47.0 percent).

Widespread productivity gains 

coupled with larger job losses 

among middle-wage workers 

than among higher wage workers 

were partially responsible for the 

considerable increase in average 

high-tech wages.7

 

In 2001, total private-sector 

wages generated in the Silicon 

Valley were $156.9 billion. At that 

time, the high-tech industries 

represented about 32.4 percent 

of all Silicon Valley private-sector 

wages and 19.2 percent of private 

employment. During 2008, the 

Silicon Valley private-sector 

economy generated approximately 

Percent change in employment

*As measured by location quotients (LQs)

Percent change in industry concentration *

CHART 2. Changes in Silicon Valley high-tech concentration and employment, 2001 to 2008

Architecture

Computer system design

Semiconductor

Computer equipment

Scientifi c research

Pharmaceuticals

Aerospace

Communication 

equipment

Control instrument

Internet, Telecommunications

and Data processing

Software 

publishers

80.0

-60.0

-40.0

-20.0

0.0

40.0

60.0

20.0

-50.0 -30.0 -10.0 0.0 10.0 30.0 50.0
$179.4 billion in private-sector 

wages, 14.3 percent more than the 

wages in 2001. Within the area, 

high-tech industries accounted 

for 32.2 percent of these wages 

and 17.1 percent of private 

employment.

Among the 11 high-tech 

industries, the largest share of 

total annual wages in 2008 were 

in computer system design (21.9 

percent), followed by scientifi c 

research (13.8 percent) and the 

Internet, telecommunications, 

and data processing cluster (12.4 

percent). Th ese three industries 

accounted for 48.2 percent of all 

high-tech industry wages in 2008. 

Th ey accounted for more than 

200,000 jobs or 7.8 percent of total 

Silicon Valley employment. 

In 2001, the same three industries 

had less thoroughly dominated 

the high-tech industry scene in 

terms of total wages. Th e three 

combined represented 40.7 

percent of total wages, with 

computer system design making 

up the largest share, 22.3 percent. 

At that time, they accounted for 

more than 215,000 jobs or 8.4 

percent of total Silicon Valley 

employment.

Conclusions

Despite net employment losses 

between 2001 and 2008, Silicon 

Valley continued as a region 

of innovation. Recent years, 

for example, have seen a new 

investment boom in the emerging 

area of clean environment 

technology.8

Following the economic slowdown of 2001, some industries 

recovered quickly and had 

reached new heights in 

employment by 2008. Most hightech industries in the Silicon 

Valley grew more concentrated in 

the local economy relative to the 

United States from 2001 to 2008. 

Large industries, such as computer system design and semiconductor manufacturing, 

remained important in terms of 

employment and wages for the 

Silicon Valley and the Nation. 

Furthermore, average wages 

for high-tech industries in the 

Silicon Valley rose at a faster 

rate (36.0 percent) than those 

of all Silicon Valley industries 

(21.7 percent) and those of the 

United States (25.5 percent).Th e 

combination of rising wages and 

more concentrated high-tech 

employment has kept incentives 

for innovation and creativity high. 

Th e Silicon Valley thus continues 

to evolve as it reinvents itself as a 

breeding ground for technological 

advancement and ingenuity.

Note on Recent

Employment and Wages

Despite the overall economic 

recession that began in December 

Regional Report August 2009 7

TABLE 2. Average annual wages and total wages by industry, Silicon Valley, 2001 and 2008 

Industry Average annual wages 

(dollars)

Percent 

change 

2001 to 

2008

Total annual wages 

(thousands of dollars)

Percent 

change 

2001 to 

2001 2008 2001 2008 2008

 Silicon Valley high-tech industries $97,344 $132,351 36.0 50,809,724 $57,681,857 13.5

Software publishers 128,790 163,972 27.3 4,224,425 4,207,687 –.4

Computer equipment manufacturing 122,864 157,402 28.1 7,105,603 6,751,453 –5.0

Scientifi c research 90,347 155,511 72.1 3,682,185 7,987,214 116.9

Internet, telecommunications, data processing 84,899 143,713 69.3 5,715,137 7,158,324 25.3

Pharmaceuticals 94,100 138,348 47.0 1,052,889 2,037,593 93.5

Communication equipment manufacturing 98,529 132,469 34.4 1,923,677 1,534,393 –20.2

Computer system design 105,504 127,296 20.7 11,306,172 12,630,841 11.7

Aerospace 71,799 123,497 72.0 599,447 1,544,085 157.6

Control instrument manufacturing 87,202 120,952 38.7 3,462,774 3,331,137 –3.8

Semiconductor manufacturing 93,049 113,092 21.5 8,134,731 6,501,664 –20.1

Architecture 72,202 92,895 28.7 3,602,684 3,997,465 11.0

 

$
more detailed nonsample-based 

data, visit the BLS Quarterly 

Census of Employment and Wages 

Web site at www.bls.gov/cew.

8 Regional Report August 2009

2007,9 Silicon Valley high-tech 

employment actually grew by 2.5 

percent during 2008; however, 

average wages fell by 1.5 percent 

during this period. Recent 

Acknowledgements: Th e authors 

thank the Labor Market Information 

Division of the State of California for 

its assistance. Th e authors also thank 

Richard Cerri, Economist, Division of 

Federal/State Cooperative Programs, 

for help in obtaining data; Tian Luo, 

Economist, Division of Economic 

Analysis and Information for creating 

the map; and Richard Holden, Regional 

Commissioner, all with the Bureau of 

Labor Statistics San Francisco Regional 

Offi ce. Th e authors wish to acknowledge, 

from the BLS Offi ce of Publications, 

Margaret Jones and Bruce Boyd for the 

visual design of this report; Leslie Joyner 

and William Parks for their helpful 

comments; and Richard Devens, an 

Economist formerly with BLS, for his 

editorial contributions.

1 Th is report uses Bureau of Labor 

Statistics data from the Quarterly Census 

of Employment and Wages (QCEW) 

dataset for California to examine 

employment and wage trends in Silicon 

Valley high-tech industries between 

2001 and 2008, the most current year 

for which data are available. QCEW data 

include information at the most detailed 

industry level on annual employment and 

wages and are the timeliest data available 

at the county level.

 2

 NAICS or the North American 

Industry Classifi cation System groups 

establishments into industries based on 

the activities in which they are primarily 

engaged.

3

 Daniel Hecker, “High-tech 

Employment: A NAICS-Based Update,” 

Monthly Labor Review July, 2005, pp. 57–72.

4 Mark Larson, “More companies 

leave Silicon Valley for El Dorado Hills,” 

Sacramento Business Journal, Sept. 7, 

2001. 

5 Th e six counties are: Alameda, 

Contra Costa, San Francisco, San 

Mateo, Santa Clara, and Santa Cruz 

Counties.

6 Location quotients are calculated 

with the following equation: LQ = 

(local industry employment /local 

total employment) / (national 

industry employment/national total 

employment). Also see Donald Lyons 

and Bill Luker, Jr., “Employment in 

R&D-intensive high-tech industries 

in Texas,” Monthly Labor Review, 

November 1996, pp. 15–25. 

7 Joint Venture of Silicon Valley, “Index 

of Silicon Valley, 2008” and John Markoff 

“Silicon Valley Losing Middle-Wage Jobs,” 

Th e New York Times, Feb. 19, 2008. 

8 Laurie Flynn, “Silicon Valley 

Rebounds, Led by Green Technology,” 

Th e New York Times, Jan. 29, 2007 and 

Katie Fehrenbacher, “Green Investing is 

Tops in Silicon Valley,” Business Week, 

Nov. 11, 2008.

9

 See National Bureau of Economic 

Research, “Determination of the 

December 2007 Peak in Economic 

Activity,” on the Internet at http://www.

nber.org/cycles/dec2008.html (visited 

June 24, 2009).

—Notes—

data trends from less detailed 

sample-based data and anecdotal 

evidence suggest that high-tech 

employment in the Silicon Valley 

has declined thus far in 2009. For