Office lease rates, venture capital investments and salaries have dropped to near-1998 levels, wiping out the gains made over the past five years, according to an annual report by Joint Venture: Silicon Valley.
In a grim assessment of the region, which once boasted legions of dot-com highfliers, the Joint Venture report said that Silicon Valley has lost more than half of the jobs created during the boom.
The average pay declined 6 percent in 2002 compared with the previous year, and per capita income was down 4 percent. The average salary in the valley has fallen to $62,500 a year from a peak of $79,800 in 2000. The national average is $38,400.
The region also lost jobs for the second year in a row, with the software industry being the hardest hit. The study said the biggest hit to the work force happened during 2001, when the number of jobs dropped from 1.5 million to 1.35 million. The number of jobs remained relatively steady through the first half of 2002.
Venture capital investment, which fueled the late '90s boom, tumbled 42 percent, to $4.8 billion, in 2002 compared with 2001, returning to 1998-1999 levels. The value of the average deal dropped to $9.9 million in 2002 from $12.2 million in 2001. Software companies landed 22 percent of the funding, the largest share, followed by networking, telecommunications and semiconductor companies.
The report's authors characterize the recent slump as just the latest chapter in the boom-bust history of the Silicon Valley region, which has included surges and declines in the defense business, integrated circuits, personal computers and the Web.
"Transformations in the Silicon Valley economy have produced a regional employment base in which software is a major driving force, hardware's prominence has decreased, business-related services account for a significant share of jobs and biomedical is emerging," the authors said.
The report does have a bit of a silver lining. Affordable housing and graduation rates are up, while juvenile arrests are down. A full 26 percent of households in Santa Clara County can afford the median-priced home in the region, up from 18 percent three years ago.
The study also offers some advice for the region: namely, get a new business model. The study's authors outline two steps to an economic recovery. First, the region needs to retain its competitive advantage by stepping up productivity. Second, it needs to find "a new means of wealth generation through innovation and entrepreneurship."