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As Computer Jobs Continue To Shrink, Health Care, Service Work Replace Them

When it comes to jobs, California’s Silicon Valley is beginning to look a lot more like the rest of the country.

The engine that helped drive the U.S. economic boom of the 1990s is finally close to emerging from the employment slump that saw 10 percent of its jobs vanish between 2001 and 2002. The jobs it is adding aren’t in the computer-related industries that made it famous, though.

In fact, nonprofit research firm Joint Venture: Silicon Valley Network figures that the region lost another 5,100 computer and semiconductor jobs last year.

Instead, the area added 4,100 new health care, construction and service jobs. If nurses and carpenters are less exciting than college student millionaires, they may promise more sustainable future growth, experts say.

“Diversification essentially allows the Silicon Valley, or any other parts of the country, to protect itself from the vagaries of business cycles,” said University of Chicago economist James Heckman, co-winner of the 2000 Nobel Prize. “Years of evidence and economic theory support that.”

The trend has implications that extend well beyond the San Francisco Bay Area. Federal Reserve policy-makers are watching labor markets closely for evidence about the supply of available workers because excess demand for labor can push wages higher and accelerate inflation.

Information sciences, durable goods manufacturing, transportation and warehousing, and professional and technical services accounted for almost 2.6 million lost jobs in the United States from March 2001 to November 2004.

Technology is one area in which data suggest that the job losses of the past four years may be permanent, Federal Reserve Vice Chairman Roger Ferguson said in a Jan. 7 speech.

In Silicon Valley, he could have been talking about Cecilia Saleme. Saleme, 40, lost her $90,000-a year job selling electronic, video and mixing equipment at Campbell, Calif.-based Focus Enhancements Inc.

After sending out a hundred resumes that led to only a handful of interviews, she said that “I’m not going to go back to the tech world at all.”

Instead, in November she opened a dog-training business called Canine Higher Learning, and she expects to earn as much this year as she did at Focus Enhancements.

Nationally, the United States has recovered the jobs lost in the 2001 recession, according to a Feb. 4 Labor Department report. Joint Venture figures that in Silicon Valley, which encompasses Santa Clara County, including the city of San Jose and the area around Stanford University, as well as parts of three other counties, the total number of jobs is still about 16 percent lower than it was in 2001.

For example, Santa Clara-based Sun Microsystems Inc., the world’s third-largest maker of computer servers, has seen its worldwide employment shrink 25 percent from fiscal 2001, to 32,000; many of the lost jobs were in the valley.

The region’s previous job levels “were an indication of overstaffing during the bubble years, with companies exploring all kinds of opportunities in a heady market without worrying about the bottom line,” said University of California professor Daniel McFadden, who shared the Nobel with Heckman.

The good news now, Joint Venture said, is that the region’s rate of job losses slowed to 1.3 percent from 2003 to 2004. “The tide has turned on job losses and slowed to a trickle,” said Russell Hancock, the group’s president. “I wouldn’t be surprised if a year from now we saw a net increase.”

The area’s new jobs are coming from the likes of Kaiser Permanente of Oakland, Calif., Gilead Sciences Inc. and New York-based PricewaterhouseCoopers LLP, all of which are expanding.

Gilead, maker of the anti-HIV medicine Viread, hired about 190 people to work at its Foster City, Calif., headquarters in 2004, and is adding more, spokeswoman Amy Flood said.

Kaiser, the largest nonprofit health care organization in the United States, is building a $350 million medical campus in Santa Clara with new cancer and cardiovascular centers that will be completed by 2007, said Charles Koch, area manager.

The project involves as many as 500 construction workers a day. The company already has 3,555 employees at nearby sites.

A study funded by the federal Workforce Investment Act found that less than half of the Bay Area’s technology workers of five years ago were still there by 2003.

Twenty-four percent of the 300,000 people tracked in the study had taken non-technology jobs that often paid less, and 30 percent weren’t recognized in California payroll figures because they stopped looking for work, left the state or became self-employed, said analyst Tracey Grose of the Sphere Institute, the Burlingame, Calif., firm that conducted the report.

Diana Hagerty, a 42-year-old mother of two from Cupertino, lost her $120,000-a-year job as a program manager for Sun Microsystems in November 2001.

After spending her son’s entire $30,000 college fund to get by, she now works 40 hours a week as a real estate agent in San Jose.

“I became extremely disillusioned by the entire situation,” she said in a telephone interview. “I got tired of putting my heart and soul into technology and walking into work one day and having someone say, `You’re out of here.’ ”

Her former boss, Sun chief executive Scott McNealy, said the region’s employment decline is “a fact of life” brought about by inevitable economic change. Painful as change is, he said, it can also be beneficial.

“There were 40,000 piano players sitting in the front of silent movies playing music,” McNealy said. “Then they figured out how to put soundtracks on the film. All of a sudden, all the piano players were out of business. Was that a bad thing? No, it was a good thing.”