Is your tech hub growing?

The economy is expected to jolt tech employment back to life this year, but a new report says the region you live in could make all the difference.

Larry Dignan
4 min read
When the economy recovers, not all technology hubs around the United States will get equal treatment in terms of jobs, according to a report released this week.

Key technology hubs such as Silicon Valley; Austin, Texas; Raleigh, N.C.; and Boston will have dramatically different recoveries in terms of jobs, according to West Chester, Pa.-based Economy.com, an economic research firm.

Economy.com analyzed the employment prospects for metropolitan areas across the United States and grouped them by regions. The research firm is projecting economic recovery and employment growth in the second half of the year for most of the country, but some high-tech areas will still struggle.

The Bay Area, including San Francisco and San Jose, is expected to struggle throughout 2002 with weak employment growth. Economy.com estimates that San Francisco's job growth, which was largely pegged to dot-coms in the late 1990's, will be flat at best in the second half, posting a 1 percent decline overall for 2002. San Jose, home to companies such as Cisco Systems, will actually see employment decline 2.6 percent in 2002.

"It's going to be a rough year for the Bay Area," said Steven Cochrane, an economist at Economy.com. "San Francisco is hurt by the technology and financial industries, and San Jose has the highest concentration of tech jobs."

While the Bay Area's employment prospects leave a lot to be desired, other tech hubs are expected to rebound. According to Cochrane, areas closely aligned with the PC and semiconductor sectors should show strong job growth in the second half of the year. Tech rebound chart

Economists have long noted that PC and semiconductor companies are "leading indicators," meaning when those sectors bounce back, others follow. That's why many Wall Street analysts have called the bottom--often incorrectly--for the stock market based on hints chipmakers such as Intel, Vitesse Semiconductor and others have dropped during conference calls.

In addition, recent surveys of chief investment officers indicate there may be a new buying cycle for PCs, which would help regions tied to that industry.

"It does seem likely that PCs and chips will lead the way," Prudential Securities economist James Lucier said. "It's especially likely when you consider the big overcapacity issues in telecommunications."

That means areas such as Portland, Ore., where Intel, AMD and Hynix have fabrication plants, and Austin, Texas, home to Dell Computer, will likely show employment gains in 2002.

Economy.com projects Austin to show job growth of 2 percent in the first quarter, 2.6 percent in the second quarter, 3 percent in the third quarter and 4 percent in the fourth quarter.

Portland should also show gains in the second half; the city's employment is estimated to grow by 2.4 percent in the fourth quarter. Part of those gains can be attributed to a recovery from 2001, when Portland employment fell as chipmakers were hit by bloated inventories. In 2002, Portland's luck is likely to change, Cochrane said.

"Inventory levels for semiconductors are worked down to levels where they should be," he said. "Portland had a big push to bring in semiconductor plants, and that should pay off."

Other areas off the beaten path will also benefit if the PC and chip sectors bounce back. According to Economy.com, the PC and chip industry accounts for 65.2 percent of the gross domestic product in Corvallis, Ore., and 26.2 percent of Boise, Idaho's GDP.

The Washington, D.C., area is also expected to produce jobs--largely due to defense spending, which is buffering the region from slowing profits at WorldCom's MCI unit, and telecom flameouts such as PSINet. "There are a lot of anecdotes about techies losing jobs and quickly landing at companies with defense contracts," said Cochrane.

Other safe areas for job hunters are areas such as Seattle and Raleigh, two economies closely tied to the software sector and companies Microsoft and Red Hat, respectively. Raleigh, home to the Research Triangle, is expected to show employment growth of 1.6 percent in the fourth quarter.

Economy.com's statistics don't tell the whole story for Seattle. Although 2002 employment growth is expected to be down 1.6 percent, that's heavily skewed by Boeing, which has laid off thousands of workers. "The tech side of the economy is in much better shape," said Cochrane, referring to stability at Microsoft.

In a research note Thursday, Lehman Brothers analyst Neil Herman said "underlying fundamentals in the software sector are beginning to turn up," noting that software companies have been relatively optimistic about future quarters.

"We believe there are the first signals of a long, gentle sustained improvement in the software sector," Herman said.

As for the areas to avoid, Cochrane said job seekers may want to steer clear of economies tied to the telecom sector. The Denver metropolitan area, home to Qwest Communications, is likely to struggle until the fourth quarter in terms of employment growth. In the fourth quarter, the Denver area is expected to show job growth of 2.6 percent, but still be down 0.8 percent for 2002.

The Boston area, home to the Route 128 tech corridor and companies such as Internet delivery company Akamai Technologies, will show some employment gains, but performance will remain spotty because of a high number of telecommunications companies, Cochrane said. "The Boston area has some diversity, but it is still being hurt by telecom," he said.