Last Time to the 90s

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OK, indulge me for one more 1990s housing bust fun fact and then we can return our focus to more contemporary concerns.

As we've discussed, everyone holds job losses responsible for the downturn. But not just any old job losses -- the blame is laid specifically at the feet of the defense and aerospace industries, which suffered as the Cold War wound down in the early 90s. And thus is born one of the bullish analytical classics: the "diverse economy" argument. Since defense and aerospace comprise a much smaller proportion of San Diego's economy in 2006 than they did in 1990, we are immune to job losses and a resultant housing downturn.

It is certainly the case that the defense and aerospace industry took a beating for a few years there. But they weren't the only ones. Have a look at the chart to the right, which displays year-over-year job growth or loss in the following Bureau of Labor Statistics supersectors: durable goods manufacturing, which includes designing and building (hopefully) durable things like airplanes; financial activities, which include both mortgage lending and real estate; and construction. The data only goes back to 1990, so the first available year-over-year comparison is in 1991. However, this should suffice because overall employment peaked in late 1990 and didn't start to decline until 1991.

Manufacturing took it on the chin, to be sure -- but so did the other two sectors. As a matter of fact, the other sectors were hit even harder. During the four years in which overall employment was on the decline, the construction and finance/real estate sectors lost 25,100 jobs while durable goods manufacturing lost 23,300.

Back at the housing peak in 1990, the construction and finance/real estate sectors provided 125,000 jobs and comprised 13.0 percent of the San Diego workforce. "Diverse economy" theorists may wish to note that these industries currently provide 178,000 jobs and weigh in at 13.6 percent of the overall workforce. The two sectors collectively shrunk by 20 percent during the first four years of the 1990s housing downturn -- why is it so hard to believe that they could decline now?

-- RICH TOSCANO