A Slow Job Recovery in Silicon Valley


Although job growth is gradually returning to Silicon Valley, don’t break out the champagne quite yet.

Lucia Mokres moved to the area five years ago. Last year, when she was working at a contract engineering and manufacturing firm, she saw several clients lose their jobs, as well as both large and small companies go under in the economic crunch. She remembers one conference vividly. While manning the event booth, instead of seeing people pitch work they had for her firm, they instead passed out resumes, asking her team for work.

Soon after, her job was cut back from 5 days per week to 4 days, which included a 20% pay cut. Mokres said, “That was really hard, as my rent and student loans did not also get cut 20%.”

She persisted over “many months” to find a better position, which ultimately resulted in a higher salary and better benefits as a clinical scientist in a medical device company based in Menlo Park, Calif. Looking ahead now, Mokres feels optimistic about her future in Silicon Valley and said, “I am in the medical industry, and there will always be a demand for medical technology and healthcare.”

“There are worse places to be,” she added. “I’m in one of the top two biotech hotspots in the country. Silicon Valley breeds innovation, and therefore will survive.”

Harold Lee* feels less cheerful. He was the class president at a tier one university several years ago, and since graduating in 2004, he has worked at several of the top companies in Silicon Valley. He is now a product manager at a social networking startup based in Mountain View, Calif. While he couldn’t imagine leaving the area, he summarized his long-term prospects in one word: “limited.”

Lee counts himself lucky to have a job at a popular startup, when the signs around him are still troubling. “There’s definitely a palpable feeling of companies scaling back,” he said. “Free lunches are no longer free, snacks are rationed out a bit more, and there’s a lot more focus on measured productivity.”

Reports from friends and peers, particularly those who have been laid off in the last year, have not lifted the gloom. Said Lee, “Things have settled down to the point where people aren’t frightened, but I doubt anyone would be surprised if they got a pink slip tomorrow.” He added, “Trying to get a job is immensely difficult. I have friends who returned to get their graduate degrees in business, who now can’t land anything.”

The lagging indicator in economics is jobs, which, for the average worker, has the biggest personal impact. Over the last year, California lost 732,700 jobs, the worst hit of all U.S. states, according to the U.S. Bureau of Labor Statistics.

The job situation in Silicon Valley has not rebounded as quickly as hoped. The area’s jobless rate is nearly double what it was a year ago, according to the state’s Employment Development Department. Nearly three times as many people are actively looking for work, versus during the dot-com bust, when the jobless rate peaked at 9.2 percent in early 2003. The recent number of unemployed is 110,900, representing an 87 percent increase from the prior year, according to the EDD.

The technology industry has continued to take a beating in the past six months. Cisco cut 700 local jobs in July, and Lockheed Martin slashed nearly 500 local jobs in August, based on state filings. Most recently in October, Sun Microsystems Inc. announced that it would eliminate up to 3,000 jobs across all sites, or 10 percent of its worldwide work force through the new year, due to the takeover by Oracle Corp.

The larger question is if the recovery in Silicon Valley will be technology-led. Many believe that the tech industry, which dominates local economics, will lead other companies out of the recession. Does a rising tide lift all boats? Due to the slower return of jobs, it will likely take more time for tech companies to generate the tax revenue needed to support the service sector and other programs again.

However, local leaders and economists feel that the worst has passed. The usual suspects are optimistic. Stanford University recently hosted its fourth annual roundtable, and the panel discussion dove immediately into the economic crisis. Moderated by television host Charlie Rose, the panel included Eric Schmidt, chairman of the board and chief executive officer of Google; Penny Pritzker, who serves on President Barack Obama’s Economic Recovery Advisory Board; Guillermo Ortiz, governor of the Bank of Mexico; Stanford Economics Professor Caroline Hoxby; Garth Saloner, dean of the Stanford Graduate School of Business; and Stanford President John Hennessy.

Google’s CEO Schmidt told the audience: “We know that things are improving. We’re seeing everyone come up at the same time, which is a good sign.”

Other experts, who track economic growth, echo similar sentiments. The perennially optimist Stephen Levy of the Center for Continuing Study of the California Economy has told press that, while Silicon Valley will continue to lose some jobs, revival signs are encouraging. He said, “We’re on the road to recovery.”

Not everyone has the same rosy forecast. Job growth in the Valley has not been creating net jobs for over a decade. Some individuals have done well, but the path to upward mobility may not be as cheery as the professional boosters and Valley insiders suggest. While the information sector for the three major Valley cities – specifically the cluster of San Jose, Sunnyvale, and Santa Clara – grew the fastest of all nonfarm sectors at nearly 31 percent since 2003, overall employment has actually dropped by 6 percent over the last 12 years, according to data from the U.S. Bureau of Labor Statistics.

Judy Huang has learned this lesson the hard way. After working nine years with local technology companies, she has returned to job hunting and found that the road to recovery is much rockier up close. After witnessing several friends struggle similarly, she set up a community group called “Yes We All Can” to support other job seekers with emotional support and job tips. Huang explained, “We have more fun doing it with a little help from our friends.” Since she started the group in May, roughly a quarter of group members have found job positions.

Hiring specialists have also seen slow growth. Andrew Adelman has not seen any particular sector bounce back yet in Silicon Valley, although he thinks that the recovery will likely start with companies that focus on efficiencies in operations. Adelman directs CoreTechs, Inc., a temporary contract staffing firm that specializes in technical and accounting positions. He noted, “Most companies we speak to are on freezes until they feel confident in either maintaining their current revenue or some pick up. Until they have that confidence, nothing is going to change.”

He felt that the last economic crash was focused mainly on Internet companies and supporting services. In his view, the current downturn is much more widespread. Many companies outside the tech industry have had to face staff cutbacks and shrinking revenue, and their paranoia feeds a deeper dread. He said, “The fear this time around is much more pervasive and thus much more damaging in the stagnation it causes. Once the fear starts to wane will be when a true recovery starts to take hold.”

Lei Han agrees. Based in San Francisco, she started a blog, “Career Coach – I am in your corner,” in February, which allows her to mentor and encourage individuals on a broader scale. From the worker’s perspective, she said, “They are all worrying more about their careers and jobs. Almost everyone I know knows someone who has been laid off.”

She added, “Ironically, people who have a job are also worried. There is a bit of survivor guilt, as well as survivor nonchalance.”

Despite recent challenges, there are several reasons for workers to be optimistic. At the top of the list, Silicon Valley still remains the world’s hotbed of innovation.

John Lekashman, an engineering executive who has lived in Silicon Valley since 1983, has seen the region survive many downturns. He laughed, “We have been iron oxide valley, and silicon valley, and software valley, and social media valley and biotech valley, and solar valley, and nanotech valley, and any of a bunch of other random new ideas that fly.”

From his experience, workers in Silicon Valley persevere. The region fosters a culture of renewal and failure, which will provide an economic buffer until the jobs become plentiful again.

* Not his real name

Tamara Carleton is a doctoral student at Stanford University, studying innovation culture and technology visions. She is also a Fellow of the Foundation for Enterprise Development and the Bay Area Science and Innovation Consortium.