9:13am

Tue March 22, 2011
Economy

Silicon Valley Job Outlook Brighter, Still Cloudy

In California's Silicon Valley, the economy is finally showing signs of a turnaround. Social media companies like Twitter and Facebook are generating a lot of new excitement, and there's even been a slight uptick in hiring. Still, the recession has done considerable damage to the region's economy, and the unemployment rate remains high.

The offices of Frog Design in San Francisco are as colorful and playful as a candy store. The rooms are lined with products the company had a hand in, such as a new kind of oven and a charging station for electric cars. The firm got its start designing products for Apple in the 1980s, and since then has worked with some of the biggest companies in the tech sector.

"Many people may have products we designed in their bathroom or in their living rooms, and they don't even know we were the secret force behind them," says Tim Leberecht, Frog Design's chief marketing officer.

Recently, Leberecht says, business has been booming. Companies are spending again, profits have been good, and there's even been a small resurgence in the IPO market with the promise of riches for well-connected investors.

Ken Rosen, an economist at the University of California, Berkeley, says confidence is slowly coming back to the valley.

"I go down there [to Silicon Valley] at least once a month for lunch or presentations, and again the energy is so palpable in the startup world [and the] the venture world," Rosen says.

The region is still a long way from the kind of boom it enjoyed a decade ago. Silicon Valley is a place of almost militant optimism and boundless confidence in the benefits of technology. However, the past few years have tested its faith in the future. Unemployment rose above 11 percent, and housing in the Bay Area dropped by nearly a third.

"There was a period when we thought Silicon Valley might be immune to this whole thing. We're a technology economy, we're export oriented," says Russell Hancock, president of Joint Venture Silicon Valley Network, a public-private forum for discussing regional issues. "But in actuality, we were not. It turned out that Silicon Valley was like any American region — we had people in a lot of pain and stress."

Hancock says that last year the economy added more than 12,000 jobs, the first net increase in years. But the jobless rate is still nearly 10 percent. Hancock says these gains in the private sector are being offset by a big drop in state and local government jobs.

"For the last year or so we were using stimulus funds locally," Hancock says. "That's now completely dried up; so now local governments are facing the full brunt of this recession."

He also says there's a fundamental difference in the job market today, and it may not bode well for the region. Big companies like Intel and Hewlett-Packard used to hire thousands of people in the area.

"The new model is companies are no longer infatuated with size. It's in their interest to stay lean, because this is how they compete. So companies today are hiving off entire divisions, and they're taking a different approach," Hancock says.

Currently, there is a big demand for engineers and software developers in Silicon Valley. However, big companies are increasingly contracting out a lot of the jobs they once handled themselves.

In part, they turn to freelancers, consultants and smaller local companies. Frog Design employs about 100 people at its headquarters, and is careful about hiring. Leberecht says getting too big, too fast would undermine the culture of innovation the company likes to foster.

"This place would be very, very different if 500 people worked here. We wouldn't be able to create the kind of culture that we want, to attract the kind of people that we need," he says.

With many companies slow to hire, it will take a long time to get back to the kind of healthy job market Silicon Valley once had. Still, a lot of people are seeing new signs of life in the economy, and they're more optimistic than they were a year ago. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

STEVE INSKEEP, host:

In California's Silicon Valley, the economy is showing signs of a turnaround. Social media companies like Twitter and Facebook are both surging. And overall there's even been an uptick in hiring. Still, the recession has done a lot of damage, as NPR's Jim Zarroli reports.

JIM ZARROLI: The offices of Frog Design in San Francisco are as colorful and playful as a candy store. The rooms are lined with products the company had a hand in, like a new kind of oven and a charging station for electric cars. Frog Design got its start designing products for�Apple�in the 1980s, and since then it's worked with some of the biggest companies in the tech sector.

Tim Leberecht is chief marketing officer.

Mr. TIM LEBERECHT (Frog Design): Many people may have products that we designed in their bathroom or in their living rooms. They don't even know that we were the secret force behind them.

ZARROLI: These days, Leberecht says, business is booming. Companies are spending again, profits have been good, and there's even been a small resurgence in the IPO market, with its promise of riches for well-connected investors.

Ken Rosen, an economist at the University of California at Berkeley, says confidence is slowly coming back to the valley.

Professor KEN ROSEN (University of California Berkeley): I go down there at least once a month and the energy is so palpable again in the startup world, the venture world.

ZARROLI: Still, the region is a long way from the kind of boom it enjoyed a decade ago. Silicon Valley is a place of almost militant optimism and boundless confidence in the benefits of technology. But the past few years have tested its faith in the future. Unemployment rose above 11 percent and housing prices in the Bay Area dropped by nearly a third.

Russell Hancock is president of Joint Venture Silicon Valley Network, a kind of public-private forum for discussing regional issues.

Mr. RUSSELL HANCOCK, (Joint Venture Silicon Valley Network): There was a period where we thought Silicon Valley might be immune to this whole thing. We're a technology economy, we're export oriented. But it turns out Silicon Valley is like any American region. We had people in a lot of pain and stress.

ZARROLI: Hancock says last year the economy added more than 12,000 jobs, the first net increase in years. But the jobless rate is still nearly 10 percent. Hancock says the gains in the private sector are being offset by a big drop in state and local government jobs.

Mr. HANCOCK: For the last year or two, we were using stimulus funds locally. That's now completely dried up, and so now local governments are facing the full brunt of this recession.

ZARROLI: He also says there's a fundamental difference in the job market today and it may not bode well for the region. Big companies like�Intel�and�Hewlett-Packard�used to hire thousands of people in the area.

Mr. HANCOCK: Companies are no longer infatuated with size. Because this is how you compete. So companies today are hiving off entire divisions and they're taking a different approach.

ZARROLI: Today there's a big demand for engineers and software developers in Silicon Valley. But big companies increasingly contract out a lot of the jobs they once handled themselves.

In part they turn to freelancers, consultants, and smaller local companies. Frog Design employs about 100 people at its headquarters, and the company is careful about hiring. Tim Leberecht says getting too big too fast would undermine the culture of innovation the company likes to foster.

Mr. LEBERECHT: This place would be very, very different if 500 people worked here. We wouldn't be able to create the kind of culture that we want to attract the types of people that we need.

ZARROLI: With many companies slow to hire, it will take a long time to get back to the kind of healthy job market Silicon Valley once had. Still, a lot of people are seeing new signs of life in the economy and they're more optimistic than they were a year ago.

Jim Zarroli, NPR News, San Francisco. Transcript provided by NPR, Copyright National Public Radio.

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