California's Silicon Valley is not roaring back from its economic slump earlier this decade but the high-tech hub is adding the kind of jobs that signal an extended and steady recovery, according to a report released on Thursday.
Home to such high-tech giants as Apple Inc, Intel Corp, Hewlett-Packard Co, Cisco Systems Inc and Google Inc, Silicon Valley, has been shaking off the drag on payrolls from the high-tech downturn thanks to solid domestic demand and growing demand overseas, said Keitaro Matsuda, the senior economist at Union Bank of California who wrote the report.
The slump bloodied Silicon Valley, anchored by San Jose, Northern California's biggest city. The region lost a fifth of its jobs between 2001 and 2004, the worst payroll losses of any major US metropolitan area since the Great Depression.
The downtrend reversed last year as local high-tech payrolls began rising, and they look set to remain on the upswing based on employees being hired, Matsuda said in a phone interview.
Over the past year, Silicon Valley's job growth has been dominated by professional services employees, reflecting demand for computer engineers, information technology designers, research and development staff and consultants, Matsuda said.
"These are the kinds of jobs that are very hard to create and very expensive to pay for," he said. "But obviously business is so good they're being created."
In his report, Matsuda noted such new high-wage jobs have helped expand lower-wage food service, wholesale and retail payrolls. All together, Silicon Valley nonfarm payrolls rose 2.6 percent in the first half of this year compared with a state-wide expansion of 1.6 percent.
The area's payroll gains come at a critical time for California, the world's eighth-largest economy. The state's housing market boomed while Silicon Valley slumped and home building and financing payrolls swelled across the state, offsetting high-tech job losses.
But now California's homes market is in a downturn, in part because of the risky subprime mortgages used to finance home purchases. Interest rates on the adjustable-rate loans are adjusting upward as the teaser low-rate introductory periods end, forcing many borrowers into default and foreclosure.
Lenders and home builders are cutting payrolls, clouding the outlook for job growth in once-hot areas and housing markets such as California's Central Valley and San Diego, San Bernardino and Riverside counties.
But Silicon Valley's job gains are making up for housing-related job losses, Matsuda said: "It sort of evens out the economic performance of the entire state." Matsuda expects hiring of highly skilled and compensated high-tech employees in Silicon Valley to pick up.