Labor market risks of a magnitude 7.2 earthquake in the San Francisco Bay area: an update and extension

The method of coupling MMI values with geocoded establishment data can be helpful in identifying the businesses, wages, and jobs most vulnerable to a hypothetical 7.2 magnitude earthquake; however, as previously noted, this method may overstate, or understate, the business interruption or losses that could occur.

The MMI values describe damage levels ranging from predominately-light damage to widespread, heavy damage. Even in the most damaged area, not all businesses will sustain damage that will curtail their activities, and some businesses that lose capability may return to normal operations quickly. In the same vein, due to expanded telework arrangements since 2020, businesses may experience disruptions to operations differently across industries. For example, employees in the information sector are more likely to perform work from home more frequently and are typically less reliant on a central physical office. Therefore, such establishments may experience reduced impact on operations than, for instance, a manufacturing entity if remote workers’ homes are not in earthquake damage zones. Industries with higher rates of telework may be more prevalent in the areas affected by an earthquake in the bay area (for example, tech companies).

Focusing on direct damage to a region’s businesses, however, may understate the impact an earthquake can have on firms adjacent to the impacted area, in terms of both geography and supply chains. Some businesses cluster in regions to be near customers and suppliers. If the relationship was interrupted by an earthquake, both customers and suppliers could be severely affected. For example, if business A was dependent on business B for inputs or for delivering their products, business A would be heavily impacted if an earthquake negatively impacted business B. Because the area is a vital transportation hub, the expected loss of life and damage to infrastructure and utilities (natural gas, electricity, or water) could also interrupt the flow of goods and services in Northern California, and the United States as a whole.

Finally, the data used in this analysis specifically predicts the number of establishments, wages, and jobs that could be affected by a 7.2 magnitude earthquake. As such, it does not capture the economic impact of the emotional toll that an earthquake can have. For example, emotional distress from losing a family member may prompt some workers in the area to take bereavement leave. Due to the broad and, in some respects, abstract nature of the potential economic impacts of the emotional toll of an earthquake, that aspect of the economic impact is beyond the scope of this article.