Silicon Valley's one-time boomtown capital has a small army of unemployed engineers, caverns of empty office space and a message for potential employers with a bit of wanderlust: Do you know the way to San Jose?
The city, the largest to have sprung from the fruit orchards that became California's famed technology hub, has lost thousands of workers due to business failures and layoffs at major employers such as Cisco Systems Inc
Only recently, it averted a new crisis by putting together a plan that helped keep eBay Inc from defecting. Instead, the Web auctioneer announced in April that it would more than double its Silicon Valley real estate holdings.
Having side-stepped the potential loss of nearly 2,000 more jobs, San Jose's development czar hopes to turn the city's slack market for property and people into a selling point.
"People who couldn't be in the Valley three years ago now can," said Paul Krutko, San Jose's economic development director, who wants prospective employers to view his city's unemployment rate of nearly 10 per cent -- well above the national average of 6 per cent -- as an opportunity to hire eager, educated workers.
Home prices in Santa Clara County also eased in April, though -- at an average price of $495,000 -- they remain three times more costly than the national average.
That hangover from the Internet boom has hampered San Jose's recruitment efforts and Krutko said the city plans to add 3,000 affordable housing units over the next two years.
His crusade is getting a boost from San Jose's major technology names, including Adobe Systems Inc, eBay Inc, BEA Systems Inc and WebEx Communications Inc, whose advertising dollars are paying for a magazine promotion that talks up the area's strengths.
Dark side of success
As people flocked to Silicon Valley for its concentration of talent and capital, it became one of the most expensive places to run a business.
That, in turn, helped spur Silicon Valley clones in northern Virginia, southern California, Taiwan, India, Israel and elsewhere.
But while government development efforts bolstered those far-flung high-tech centers, such programs had little to do with Silicon Valley's own spectacular rise in the 1960s and 1970s, when defense contractors and the chip makers that gave the valley its name turned then-cheap
But now technology workers have scattered as U.S. companies shed workers and ship work offshore. A recent UCLA study forecast that California will lag the nation in recovery with tech jobs not returning to Silicon Valley even if business conditions improve.
Start-up capital, which poured almost $33 billion into the Bay Area in the boom year of 2000, has dried up.
In 2002, San Francisco start-ups drew just $7 billion in such funding, according to the tracking firm VentureOne.
"We're not the only game in town. We were for a long time. Guys that really wanted to live in Taiwan would come here because that was where the action was. Now you can start a business in Taiwan," said Timothy Bresnahan, director of the Center on Employment and Economic Growth at the Stanford Institute for Economic Policy Research.
San Jose's neighbor Santa Clara just weeks ago learned that 3Com Corp. is moving its executive team to Massachusetts as part of a broader consolidation effort.
Ron Garratt, Santa Clara's assistant city manager, said the city's total general fund has fallen nearly 15 per cent, from around $140 million in late 2000 to about $120 million.
Three-quarters of that lost tax revenue can be linked to corporate failures and downsizing, he said.
Garratt, who has worked in Silicon Valley local government for nearly two decades and weathered such fiscal crises as the Savings & Loan debacle of the late 1980s, said the region's current problems are the worst he has seen.
"This is entirely different. This is much scarier," Garratt said. "Next year may be a more difficult budget year than this year ... We don't see any quick resolutions. We don't see these buildings filling up. We don't see these hotels filling up."
