High-Tech Industry Sheds More than One-Half Million Jobs in 2002, AeA Report Says

However, Decline in 2003 Has Slowed Dramatically

WASHINGTON, DC,– A study released today by AeA shows that in 2002 the U.S. high-tech industry lost 540,000 jobs, dropping from 6.5 million to 6.0 million. A preliminary look at data for 2003 shows that the decline in high-tech employment slowed considerably in 2003. The report, AeA’s annual Cyberstates 2003: A State-by-State Overview of the High-Technology Industry, details national and state trends in high-tech employment, wages, exports, and other economic indicators.

The sector with the largest decrease in jobs was electronics manufacturing, accounting for more than half of all tech jobs lost between 2001 and 2002. For the first time in the seven years of publishing Cyberstates, the software sector recorded a loss of nearly 150,000 jobs last year. Indeed, the once-thriving software sector posted large increases in employment in all previous editions of Cyberstates. The communications services sector posted a similar loss of jobs. The engineering and tech services sector lost 15,000 jobs in 2002. The one bright spot was in R&D and testing labs, where employment increased by 7,000 in 2002.

"While high-tech employment fell by eight percent last year, preliminary 2003 data show a significant slowdown in high-tech job losses, with a decline of four percent,"said AeA’s President and CEO William T. Archey. "We project that the 2003 high-tech job losses will total 234,000--down 57 percent from the 540,000 decline in 2002."

Archey further stated, "However, these declines have caused us to pause about two important issues. We are aware of current budget constraints, but now is not the time to cut back on education, particularly in math and science. We need a world class workforce to deal with world class challenges. Our second concern is the decline in basic research, particularly in technology, by the federal government. We worry that we have eaten the seed corn of federal research of 20 and 30 years ago that is not being replenished."

For the first time, Cyberstates 2003 is based on the newly implemented North American Industry Classification System (NAICS). AeA selected 49 NAICS codes to define the high-tech industry. They fall into four broad categories: electronics manufacturing, communications services, software, and engineering and tech services. This more current and comprehensive system allows us to capture several sectors which we could not with the previous system. These include fiber optic cable manufacturers, semiconductor machinery manufacturers, and web search portals.

This new industry classification system is fundamentally different from the old Standard Industrial Classification (SIC) system. Every sector of the economy has been restructured and redefined by the NAICS. Consequently, the data presented in this report are not comparable in any way to previous editions of Cyberstates. In this edition, however, 2001, 2002, and 2003 data use the NAICS system and are therefore comparable.

Cyberstates 2003 found that all but three states lost high-tech jobs in 2002. California lost the greatest number of tech jobs, shedding some 123,000 jobs. Texas was second with tech jobs down by 61,000 jobs. Interestingly, the District of Columbia, Wyoming, and Montana were the only three cyberstates to add technology jobs between 2001 and 2002.

This seventh annual edition of Cyberstates provides a comprehensive review of the high- tech industry nationally and by state of high-tech employment, wages, payroll, establishments, and exports. Cyberstates also offers data on venture capital investments, R&D expenditures, and home computer and Internet use.

Cyberstates 2003 Key Facts

U.S. Tech Employment Fell Significantly in 2002

U.S. high-tech employment totaled 6.0 million in 2002, down 8 percent from 6.5 million in 2001

Preliminary 2003 data show that high tech will lose 234,000 jobs, a 4 percent decline

High-tech manufacturing industry employment fell by 13 percent, losing 233,000 jobs between 2001 and 2002

The biggest 2001-2002 manufacturing job losses were recorded in electronic components (-76,000), communications equipment (-47,000), and semiconductors (-41,000)

The communications services and software sectors each shed 146,000 jobs from their payrolls

Engineering and tech services dropped by 15,000 jobs

R&D and testing labs added 7,000 jobs in 2002

All But Three Cyberstates Lost Tech Jobs in 2002

California (995,000), Texas (479,000), New York (330,000), Florida (271,000), and Massachusetts (256,000) led the nation in high-tech employment

California (-123,000), Texas (-61,000), Massachusetts (-40,000), New Jersey (-29,000), and New York (-28,000) lost the greatest number of tech jobs in 2002

California's high-technology industry lost 123,000 jobs between 2001 and 2002, according to Cyberstates 2003: A State-by-State Overview of the High- Technology Industry, a new analytical report released today by AeA. Cyberstates 2003 shows that California's tech industry dropped by 11 percent in 2002 to 995,000 workers.

"The latest Cyberstates data clearly show that California's high-tech industry was hit hard last year by the economic slowdown," said Oli Thordarson, president/CEO Alvaka Networks, and chairman of the AeA Orange County Council. "We are hopeful that the resiliency of our industry will prevail and that high-tech employment will begin to grow again in the near future."

Cyberstates 2003 also examines tech exports and venture capital investments. California exported $44 billion worth of high-tech goods in 2002, compared to $56 billion in 2001, a 21 percent drop. Similarly, venture capital investments in California dropped by 43 percent, falling from $16 billion in 2001 to $9 billion in 2002.

The District of Columbia (+2,200), Wyoming (+500), and Montana (+100) were the only three cyberstates to add tech jobs between 2001 and 2002

Colorado led the nation in concentration of high-tech workers in 2002, with 98 high-tech workers per 1,000 private sector workers, followed by Massachusetts, Virginia, New Mexico, and Maryland

U.S. Tech Exports and Venture Capital Expenditures Fell in 2002

U.S. high-tech exports fell 12 percent to $166 billion in 2002, from $188 billion in 2001

High-tech exports represented 24 percent of all U.S. exports in 2002

High-tech exports dropped between 2001 and 2002 in every industry segment, except in electromedical equipment manufacturing

U.S. high-tech venture capital investments totaled $13 billion in 2002, dropping 52 percent from the $27 billion in 2001

Cyberstates 2003 is available to AeA members for $95 and to non-members for $190. Contact AeA at 800.284.4232 or 408.987.4200, or www.aeanet.org. Cyberstates 2003 is part of AeA’s cyber report series which includes Cybernation 2.0, CyberEducation 2002, and Cybercities.

AeA is the nation's largest high-tech trade association. Founded in 1943, AeA utilizes an extensive international network of offices to serve its members though advocacy, training, research and business services. www.aeanet.org