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Jobs, jobs, jobs


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2007 Apr 18, 5:04pm   37,414 views  444 comments

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It has often been said here that the only thing that will cause a drop in Bay Area housing prices is widespread job-losses.

Perversely, this is actually also used as a spurious justification not to hope for a drop in prices -

"Prices will drop only if jobs disappear, and you would not want to lose your job, would you? So you better not hope for a drop in price."

Proof by denial, as it were. Ignoring the completely asinine logic inherent in that line of argument...

I would like to discuss what you think are the prospects of the job market here.

What industry are you in? What is the outlook for your niche? What are your employers doing? Don't name any employers, just share general information about what the hiring trend is for late 2007 and beyond.

My own expectation is that we will see a slowdown in the second half of 2007. Based on the financing I have seen, I also expect trouble in the web-2.0 startup scene by the end of the year, when some of them will fail to get additional funding and will either be acquired for i.p., or shut down in early '08. And this is even before factoring in macro issues like tech-spending and the larger economic picture.

What do you think?
SP

#housing

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1   StuckInBA   2007 Apr 18, 5:30pm  

The job market is currently doing fine in BA. The housing prices depend not just on the current job market, but also about people's perception of job security. In BA, I argue it heavily depends on stock market - which is not just proxy for economy to most, but is THE economy.

In stock market, it's "happy Days Are Here Again", till the next panic selling which can happen tomorrow when the market opens.

So, if the stock market crashes, or continues to have mini-crashes, it will seriously affect the psychology and hence the housing prices. Jobs may not be a leading indicator. Of course, without prospects of IPO, VC funding may dry up too, seriously affecting the job market.

Even without the suffering of economy/stock market, jobs can stagnate. And that has been my position for a while now. So while I don't see massive problems, but I don't see any pay rises on the horizon.

Another factor - maybe more important than jobs - is mortgage rates. I have been wrong on this, completely wrong, till now. Rates have stubbornly stayed low. So I am not going to predict when they will again be at 8%. But if it happens, then bye bye housing prices, even with a strong job market.

2   e   2007 Apr 18, 5:32pm  

What industry are you in? What is the outlook for your niche? What are your employers doing? Don’t name any employers, just share general information about what the hiring trend is for late 2007 and beyond.

I work at a Fortune 500 tech company. The outlook for my niche is very bright. Hiring qualified software engineers is freakin' hard right now. A few of my friends in my and other companies have gotten fairly dramatic increases either via raises or by changing companies. (10%+)

3   e   2007 Apr 18, 5:34pm  

Oh yeah, I'll also add that VCs are desperate to give out money. But I think we all noticed that from the Web 2.0 hoopla.

4   Jimbo   2007 Apr 18, 5:36pm  

I work for an Internet media company, a big one. It is hard to hire good programmers right now, so I am trying to hire people in China. It is a big hassle hiring people overseas, but Chinese programmers make something like 1/6th of American ones, so the it is hard not to at least try.

5   Eliza   2007 Apr 18, 6:47pm  

I had three unsolicited job offers this week--everyone I have ever worked for seems to want some of my time right now. This is across several different lines of work, not all tech. Sounds as though it is hard to get good help these days. So...things are looking OK from here, at least at the moment. Having lived through the last tech boom and bust cycle in the Bay Area, I am now squirreling away money so that when the party is over--and I know the party will end sometime--we can leave if we like and perhaps take some start-up capital with us. However...the party got pretty crazy before it ended last time, and while it will be different every time, I have yet to see the disconnect from economic realities that characterized the latter days of the last boom cycle.

6   ozajh   2007 Apr 18, 11:21pm  

Prices will drop only if jobs disappear

I would accept the statement without the 'only' (which of course completely reverses the cause and the effect).

7   Different Sean   2007 Apr 18, 11:55pm  

spam, already... how did they get through?

8   SP   2007 Apr 19, 1:03am  

Different Sean Says:
spam, already… how did they get through?

I deleted them.
SP

9   DinOR   2007 Apr 19, 1:10am  

Jon,

That's referred to as the "Vanity Plate Index".

It's a lesser known component of the Consumer Confidence Index. Randy H could probably explain it a lot better than I could though. Kind of goes hand in hand with the "Mistress Index" only without the strong correlation to apt. rents in Lower Manhattan.

10   lunarpark   2007 Apr 19, 1:16am  

industry: healthcare/surgical-primarily elective
caseload: down slightly-may or may not be related to the economy at large
challenge: recruiting young doctors as older doctors retire, cost of living unattractive

11   DinOR   2007 Apr 19, 1:26am  

SP

To date Wall Street has done a great job washing it's hands of the HB. Like the front row of a fashion show we're truly bedazzled as each new model makes her appearance only to "fall in love" all over again 30 seconds later. In short... "we" have the attention span of a gnat!

REIC's job problems are REIC's job problems. (We're movin' on) Whadda want from ME?

I'm with you, whatever the former loanowner's problems were, they're not my problems. My entry point is what matters to me. If the neighborhood happens to "be oddly quiet" for a time, I can live with that. When "the next big thing" comes along things will liven up a bit.

Then it's no longer, Jobs, jobs, jobs

(It's Girls, girls, girls!)

12   sfbubblebuyer   2007 Apr 19, 1:39am  

I work at a company that writes software for consumer electronics.

We just had a hiring spate in late 2006 early 2007, and we're in a holding pattern for hiring right now, because we're worried about growing too fast into a possible recession.

Consumer spending cuts will definitely affect us, so we're cautious right now, but pretty excited about our products. We also have income, not just vaporware. :)

13   sfbubblebuyer   2007 Apr 19, 1:40am  

Also, this makes me mad :

Ms. Bair told reporters that many times it is in the interest of investors as well as borrowers to work out new loan arrangements to avoid foreclosure because the cost of seizing and reselling the homes is high. She suggested that some investors may allow borrowers to maintain low "starter" interest rates to prevent defaults when the rates suddenly adjust to higher market rates.
"I don't think they really will be harmed if the starter rate is just continued." she said. "What's the alternative? Foreclosure, and then they face much bigger losses."

It's from this article.

Yes, the solution is to give those irresponsible idiots permenant teaser rates.

14   Randy H   2007 Apr 19, 1:57am  

I agree with most of what others are observing. The job market is, and has been for a while now, very robust. Not like the ridiculous late 90s boom times, but just good solid normal good.

My wife works for one of the larger public software companies and she has been importing hires (finance & accounting) from elsewhere in the country since she can't find talent locally. This has been the case for 2 years now.

I see the VC and Angel side of things and there is more money flowing into startups than many people realize. There really is too much money looking for deals. But it's not really like the late 90s boom in VC either. I'd say the number of stupid funding deals to reasonable ones is maybe 1:10 where in the 90s it was 9:10. There is a big difference with the Web 2.0 companies: many of them already have profit, and those that don't have believable business plans. I don't think it's time to call a Web 2.0 bubble yet.

I also think things will slow down by the end of the year, but I don't think this spells recession, just slowing growth. That means job losses mostly through attrition, which also means companies will still be hiring, just not net adding jobs.

Specifically the charge that Web 2.0 companies will start to flounder late in the year goes against the funding cycle of when most of these companies were funded. Except for the few very early ones funded in 2001-2002, most of these startups have at least a year or three left in their investor's portfolio life cycle. That means many will get additional rounds so long as they aren't declared dead. Some may get sold, but the nexus of acquirers are also BA companies so acquisition doesn't automatically translate into the area fully losing those jobs.

15   speedingpullet   2007 Apr 19, 2:01am  

The husband works for a large japanese games developer - so - like in so many other depressions, I'd wager that his job is pretty secure.

IIRC one of the few growth industries during the Great Depression and WWII was the entertainment industry - people needed a break from the woes of the day, so flocked the the movies. My bet is that games serve much the same purpose today, so while not totally recession-proof, he has a better chance than most at keeping his job.

As for me, I have my finger in so many pies at the moment - website design, animation, crafts, and all from home - that if I lost one part of it, i'd be able to find another way of making a buck. I have a slew of hard science skills, so could go back to database management/statistics if I really had to.

If we suddenly faced his redundancy, we've got enough savings to tide us over for a few months, and I'm not too proud to go and find a job doing menial work. Although I'm a bit old and creaky, I've done everything from wait tables, worked in factories and even been an agricultural worker - I'd gladly go back to manual labour if the $hit hit the fan.

We rent, have no debt, and live well within our means. If push came to shove I'd dig up our back yard, plant it with vegetables and raise chickens. We'd never starve.

16   Randy H   2007 Apr 19, 2:15am  

Bork

Are you a developer in telecom software? If your comfortable, what's your profile. I know someone desperately looking for telecom software talent in the area -- who's currently exploring on-shoring elsewhere in the country half because he can't find the talent here.

17   Randy H   2007 Apr 19, 2:20am  

Perversely, this is actually also used as a spurious justification not to hope for a drop in prices -

[...]

Proof by denial, as it were.

I agree the argument is being used fallaciously by most realtors, who're just parroting rhetoric anyway. However financially it is not a self contradicting because jobs and the housing market form a reflexive system.

18   Steveoh   2007 Apr 19, 2:28am  

There is a company that produces high end bicycle bearings and other parts, that chose to move out of the bay area a few years ago. They faced the problem of not being able to pay the salaries required to own a home, raise children and so forth, in the BA. Consequently, attracting and keeping qualified engineers and people with other needed skillsets, was a challenge.

The company moved to Redding but then suffered a loss of "talent" as employees left because they didn't like the extreme summer weather of Redding. Now they couldn't find qualified new hires that wanted to live there.

A second move to Portland OR seems to have fit the bill for this company. So, I wonder how many companies today are considering a move, for similar reasons. Or maybe there are businesses here that foresee some relief in this houseing market downturn.

Afterall, the lowering of the cost of living without a drop in salary, is like getting a raise, right?

19   Claire   2007 Apr 19, 2:40am  

Well, the company my husband works for want to hire more people, but are finding that everyone they interview are on much higher wages and benefits than the company are paying their own people currently. Biotech.

They are also thinking of outsourcing to China - cheap labor.

20   astrid   2007 Apr 19, 2:41am  

I agree with the observations of most here. I'll add a couple wrinkles from my particular perch.

I work as a librarian in a large law firm and we've been flooded with web2.0 datamining and RSS outfits. Right now my firm subscribe to 4 or 5 SEC datamining services (on top of their direct access via Lexis and Westlaw). The independent outfits will either be bought out or die. Most of the jobs there will be gone or outsourced. I was talking to a woman yesterday who had worked at Westlaw and she said that West has outsourced their indexing service to India.

I don't think a lot of the legal service jobs will be here in the long haul, especially jobs not directly in contact with lawyers. There's lots of protection for lawyers and people who work directly under them due to US bar associations and confidentiality issues. But even there, I've read about big firms outsourcing support staff to West Virginia and so on.

21   astrid   2007 Apr 19, 2:45am  

I will say, outside of very lucky surviving few, the dot.com bust cleared out a lot of incompetent IT people. My dad said very few companies are willing to train anymore. The pay for good skills is quite good and there's a lot of demand, but you have to have a good skill set to get those jobs.

22   sfbubblebuyer   2007 Apr 19, 2:48am  

Astrid,

Amen. I was working in the dot coms (the wrong ones, unfortunately. WHY did I turn down Google?) back then, and the mouth breathers that were allowed to call themselves web developers back then truly boggled the mind.

They are back to flipping burgers again. Sweet.

23   DinOR   2007 Apr 19, 2:50am  

Steveoh,

Yeah, watch out BA! Pretty soon the obvious appeal (10 months of BLAH weather) and our "infinitely cheaper cost of living" and there won't be a bicycle ball bearing mfr. LEFT in the BA!

All your chrome ball bearing.... things are belong to MUGGY!

Seriously, this was reported as a "major score" by the local media. I know, I know. We can have the jobs but the "Critical Mass" clowns go with the deal! I know. :(

24   astrid   2007 Apr 19, 2:51am  

Law related Web 2.0 outfits are tiny and don't absorb a lot of workers.

25   astrid   2007 Apr 19, 2:54am  

SFBB,

Unfortunately, the remaining deadwood is concentrated in defense, homeland security, and places like Fannie Mae. My dad still have to work with these types of people as a contractor. Those people are worse than worthless.

26   Randy H   2007 Apr 19, 2:56am  

Furthermore, the 4.6% rate is still more than 2 full percentage points above 1999 and 2000 levels.

2.6% unemployment rates were an aberration and a very bad thing. 2.6% is _below_ full employment levels, and means there was a negative "real" unemployment rate. Keep in mind that unemployment rates include at least 2.5% of churn and most people think another 1-2% of "uncounted workers". Uncounted workers drop out of the tally because they are inactive too long. This means that women taking a couple years out to raise kids, people on year long sabbaticals, people doing independent consulting to fill the gap while they wait for one of those hard-to-get jobs fall out of the measure.

4.6% is pretty close to full employment. Anything more and we'll get another annoying boom and burger flippers will start pretending to code Ajax.

27   DaBoss   2007 Apr 19, 3:11am  

Randy -

"My wife works for one of the larger public software companies and she has been importing hires (finance & accounting) from elsewhere in the country since she can’t find talent locally. This has been the case for 2 years now."

Im in Finance for SW company. Here is the rub, due to SOX Internal Control (segregation of duties) you have to hire more people than you need. That is why its said, SOX is expensive. Your wife can explain this to you far more. From the lowely staffer up to CFO you are required to have someone looking over your sholder checking your doing everything correctly, and someone else is looking over theirs.

There isnt a shortage today, there is however a misallocation and loss of common sense in the profession. How many accountants does it take to screw in a light bulb... far more than needed because of goverment regulation.

28   DaBoss   2007 Apr 19, 3:14am  

"San Jose’s unemployment rate of 4.6%"

thats because over 300,000 people left the BA.
We are down to 840,000 in workforce today. The same number as
was in 1991.

29   Peter P   2007 Apr 19, 3:31am  

Is it a good time to change industry? How do people take the leap psychologically?

30   DaBoss   2007 Apr 19, 3:39am  

Ha Ha Says:
Borland to Relocate Corporate Headquarters to Austin

I hate seeing this happen. Borland has been in BA for decades.
We already lost 3com and a good chunk of top Fortune 50 R&D centers.

High home prices are to blame.

31   DaBoss   2007 Apr 19, 3:44am  

"Some young IT guys believe in work-life balanace."

We have prezals and Pepsi in the frig at work. Some left over Pizza
from last night too.
When you get down to it, the real IT and Devoplers love
working 50-60 hours a week with very little outside
activity. This is what motivates them. You wont see them at a
Sharks Game.

32   skibum   2007 Apr 19, 3:48am  

From the posts so far, my conclusions are:

The dot-bomb bust cleared out a huge amount of the dead wood, those who were poorly qualified for tech jobs but were jumping on the gold rush. Many skilled tech people lost their jobs as well in the process.

Today, we're left with a much smaller pool of qualified employees who stuck around in the Bay Area. Now with many companies back to a stable growth pattern, they are having trouble finding good, qualified tech people - hence the observations of many here that hiring skilled workers is difficult. Add on top of that the significant disincentive to moving to the Bay Area from out of state due to housing costs, and these observations makes perfect sense.

Companies here can even pay qualified tech hires over 1 HaHa (on the high from what I gather), and that would still not be enough. Yes, you can buy *something* here on that salary - a condo, a stucco box in Sunnyvale, or whatever (unless you become a FB...), but how does that sound to someone moving from their comfortable 4br home on 3/4 acre somewhere else in the country?

In the end, the true lure that gets tech people back into the Bay Area is the carrot of stock options. Many of the tech folks posting here have discussed it on a personal level, and it's clearly the major driver. It's the dream of getting swept up in a new wave of ipos/acquisitions.

33   DaBoss   2007 Apr 19, 3:48am  

"Companies have been moving out of the Bay Area for quite a while."

Since 1985 manufacturing was moved to other states and then offshore.
By early to mid 90s all mfg interest was soft off to third party interestes
like Sanmina, SCI and Solectron who had operations world wide. Corporations jetisoned all their mfg. R&D back in the 80s was offlimits
to CFO cust cutting. But that too has changed.

34   Shabba   2007 Apr 19, 3:51am  

I work for a very large health-care employer in the east bay. We are hiring, I wouldn't say the hiring is very brisk though. We have a lot of trouble finding people because very few want to live here at the wages we offer. There is no way we can adequately compensate someone for the cost of living difference compared to other areas. I don't understand why any anyone would relocate here, the jobs here don't pay that much more than other places and the vast majority of people who move here are completely priced out of the housing market.

35   skibum   2007 Apr 19, 3:57am  

Are you Shabba, as in Shabba Ranks?

36   DaBoss   2007 Apr 19, 3:58am  

"In the end, the true lure that gets tech people back into the Bay Area is the carrot of stock options."

Now that stock options are expensed and the options mess of over 300 companies. That game is over. Bear in mind for every IPO in 1999 5 others didnt make it. Their busted up companies were purchased for pennies on the dollar. I worked in the B2B sector back in the day.

37   Shabba   2007 Apr 19, 4:02am  

Skibum-Yep, that's who I am thinking of.

38   Randy H   2007 Apr 19, 4:06am  

I disagree the ISO option game is over. Many companies are still liberally distributing options. They're just doing so now under closer supervision of their audit committees and comp committees.

I don't know of any VC funded companies that aren't issuing options. Since so few plan to go public (a large number are built for M&A) they don't need to worry too much about public compliance beyond the minimum to pass due diligence. The rest is the acquirer's problem.

Few of those 300 options scandals have resulted in much of anything, including permanent stock price damage. The problem really is that Wilson Sonsini was giving *everyone* the same bad advice, thus so many companies have consistently violated pricing issues.

39   GammaRaze   2007 Apr 19, 4:11am  

I work as a software developer in san francisco. My company is actively hiring across various departments.

40   e   2007 Apr 19, 4:15am  

challenge: recruiting young doctors as older doctors retire, cost of living unattractive

Small Rant: The ER situation in the Bay Area is ridiculous. A friend of mine got really sick at 4am on a Wednesday and was told by an ER over the phone that all of them were on "divert"

This 2000 article highlights how bad the problem is in SF: http://tinyurl.com/3x9zzs but it can probably be generalized to the rest of the peninsula.

I love how keep building medical centers without ERs. I can't blame them - ERs are terribly unprofitable. If I were building a hospital, I'd try to leave it out as well.

Maybe I'm just spoiled by living in a few East Coast places that had a ridiculous numbers of hospitals. At one point, I lived in a place that had 2 trauma level 1 hospitals within 15 minutes driving distance.

(Did you know that if you get into a major accident at Gilroy, they have chopper you to a hospital? It doesn't feel that remote, but it really is...)

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