Estimating economic losses in the Bay Area from a magnitude-6.9 earthquake

Monthly Labor Review, Dec, 2007 by Richard J. Holden, Donna Bahls, Charles Real

Data from the BLS Quarterly Census of Employment and Wages are used to analyze potential business and economic losses resulting from an earthquake on the Hayward Fault in northern California

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According to the U.S. Geological Survey, the Hayward Fault in northern California generates, on average, "a damaging earthquake every 150 years." The Hayward Fault is considered "the single most dangerous fault in the entire Bay Area because it is ready to pop and because nearly 2 million people live directly on top of it." (1) The last major earthquake on the Hayward Fault occurred 139 years ago, in 1868. It was known as the "Great San Francisco Earthquake" until 1906, when the city experienced a larger and more damaging earthquake on the San Andreas Fault. The Hayward Fault underlies Alameda County, a heavily populated urban area in northern California that is home to 41,000 employers, 682,000 employees, and a total quarterly payroll of $9.3 billion. In addition, Alameda County lies over approximately three-fourths of the length of the fault and therefore faces the greatest potential exposure to a damaging earthquake occurring on the fault. Geologists estimate that the fault has a 27-percent chance of experiencing a seismic event by 2032.

This article analyzes and maps employer data on employment and wages to assess potential business and economic losses from a magnitude-6.9 earthquake in northern California along the Hayward Fault. The article uses data from the BLS Quarterly Census of Employment and Wages (QCEW) to demonstrate how these data--when combined with seismic hazards information--can be used to assess potential business and economic losses from a major earthquake. (Such an approach could also be used to assess the damages from other natural disasters.) Labor market analysts from the California Employment Development Department overlaid employment data from the QCEW onto seismic hazard information provided by the California Geological Survey to produce maps and tabulations that correlate estimated shaking intensities with employment levels for the counties in the San Francisco Bay Area that lie along the Hayward Fault.

Methodology

Two sets of data were prepared for this analysis. First, the California Geological Survey produced a geographic file with Modified Mercalli Intensities (MMI) for the San Francisco Bay Area. The MMI scale gauges the level of intensity of the effects of an earthquake at different sites. Intensity differs from magnitude in that the effects of any one earthquake vary greatly from place to place, depending on a number of factors, including the area's proximity to the quake's epicenter, its population density, and the number of buildings and other structures located there. The MMI scale has twelve levels, ranging from barely noticeable (I) to catastrophic (XII). For this analysis, the file delineated the geography of the MMI zones from level VI (strong shaking, light damage) to level VIII and higher (severe shaking, moderate to heavy damage). Although the MMI is an ordinal scale, it correlates closely with measured shaking levels and is, by definition, a measure of damage.

The second data set was prepared by the California Employment Development Department (EDD) using the geocoded 2006 employer data from the Quarterly Census of Employment and Wages (QCEW), which collects information on establishments for unemployment insurance taxes purposes. The QCEW data are edited by staff from EDD and BLS to improve their usefulness for economic analysis and planning. The employment data used here include the major proximate Eastern San Francisco Bay Area counties, with particular emphasis on Alameda County, because it encompasses the most densely populated areas around the Hayward Fault, from Fremont in the southern part of the county to Berkeley in the north. EDD then produced industry tabulations that array potential exposures by industry and number of employers, employment, and quarterly wages within the MMI shaking intensity zones. These tabulations were then compared with countywide data.

Analysis

As mentioned previously, Alameda County has 41,000 employers, with 682,000 employees and a total quarterly payroll of $9.3 billion. Because the County encompasses roughly three-fourths of the length of the Hayward Fault, it is the most exposed county in the region, in terms of potential damage from earthquakes occurring on the fault.

Map 1 delineates the shaking intensity zones that would occur throughout the San Francisco Bay area in the event of a magnitude-6.9 earthquake. As is apparent, most of the areas with MMI levels of VIII or greater (shown in red) are in Alameda County. Map 2 shows the locations of employers in the area overlaid onto the shaking intensity zones. As can be seen from the map, a large number of employers are located in areas that are expected to experience the greatest shaking intensities.

The BayArea. Table 1 shows total exposures in the nine counties in the San Francisco Bay Area that are in MMI zone VII and those in zone VIII or higher. As can be seen in the table, the two zones combined include 87,000 employers, 1.5 million-jobs, and quarterly wages approaching $25 billion. In the wide area circumscribed by both zones, the employment and earnings exposures would fall, in descending order, primarily upon the counties of Alameda, Santa Clara, San Francisco, and Contra Costa. But the vast majority (87 to 89 percent) of the employment and earnings exposure in the MMI-VIII-or-higher shaking zone would fall in Alameda County.