The March 2011 Silicon Valley Positive Outlook Update

The focus of my last post was on whether or not I believe Silicon Valley has inflated like a 1999 bubble. I don’t think it has, but the stock valuations are still pretty high. If I were to guess, I’d say the apparent investment upswing is a byproduct of cash sitting on the sidelines. Investors have it and big companies have it. Investors plant the seeds and companies like Google buy the fruit at the first sign of flowering.

Silicon Valley is an interesting place though. Many of the companies there don’t want to be viewed as uncool. Once that happens it means a particular culture has set in. Which of these companies seem more exciting: Facebook or Yahoo? Google or Microsoft? You get the picture.

Earlier this week there was an article on cnn.com in the Tech section about the hiring on Silicon Valley. Here are some quotes and stats from the article “Silicon Valley experiencing new hiring boom” by Dan Simon:

  • Silicon Valley: 10.6% unemployment rate
  • Last month’s (March 2011) national average was 8.8%
  • Silicon Valley produced 1,200 jobs last month and expected to add thousands more in 2011.
  • According to SimplyHired.com, a search engine for job listings:
    • nearly 40% of 130,000 open positions in Silicon Valley are for software engineers
    • Since July of 2009 there’s been a 245% increase in openings that have “Facebook” as a keyword
    • Over the same time period, a 421% increase in “Twitter” job postings
  • Innovations in social media, mobile and cloud computing are driving the growth, said Dion Lim, SimplyHired’s president.
  • LinkedIn, the social-networking site for professionals, hired nearly 500 workers last year — almost doubling its workforce.
  • “As we grow the company, we’re always on the lookout for top talent,” said Jeff Weiner, LinkedIn’s CEO.

Differentiating Using Strategy and Technology

The Academy Awards were a few weeks back and the popular movie The Social Network was nominated for Best Picture. It didn’t win the award, but it did elevate Facebook into a cultural phenomenon. It’s no longer another website – it’s Facebook. People care about it like their Nike running shoes, Apple iPod, and Starbucks coffee.

Each of these brands has used slight advantages in their products to become the dominate company in the space. How or why does this happen? Well, first I’ll mention luck. It always plays a role. In addition to luck, it’s the people.

Individuals and teams within these companies differentiate their offerings. They do so within a cost structure that maintains competitiveness and they do so with an eye toward value. Most people think of value as what Wal-Mart offers. One product 10 cents cheaper than a competitor and that is true in a commodities evaluation. Paper towels are paper towels. Value becomes much more abstract when the offering – product or service – has an association related to it. Starbucks originally pulled people in because the coffee was stronger. The association was that it woke up better than other options. And Apple combats technophobia because they create electronic devices that are easy to use.

This value is marginal at first, but then it snow balls. Getting it to snow ball is the key and then building on that is paramount. Facebook used exclusivity as the differentiator and then opened up the site to ride the network effect. Now it can exploit it’s pure numbers for monetary gain.

Earlier this year Goldman Sachs in a backroom deal valued Facebook at $50 billion dollars. Valuations like this have some to speculate that there is another tech bubble. Groupon, Google, Facebook, and others are the poster children.

In the world of the internet, small differences in your products can be the difference in sinking or swimming. Because of that Silicon Valley is leading the way in an escalating war for tech talent. Google is offering $20,000 more than average to the people they’ve targeted. Some firms are teaching their employees how to be entrepreneurs. In Silicon Valley it’s an inevitability, might as well make it a perk.

Do I think its a new tech bubble? I don’t. How engineers are using the internet now is very different than 15 years ago. Now it’s used to implement strategies that were inconceivable just three years ago. New approaches can separate and new technology can accelerate. What goes into the making of a Best Picture? It’s more than just film, it’s artistry.

February 2011 Jobs Report and Wages

Here are the job market and compensation numbers for February 2011 (based on the job report):


Net gain
of 192,000 jobs in the month
(Revised in March to a gain of 194,000)

  • Analysts expected an overall gain of 190,000
  • Private sector payrolls increased by 220,000
    • Private service producing industries added 152,000
    • Goods producing industries gained 70,000


  • December was revised to a gain of 152,000 from a revision of 121,000 and an original reading of 103,000
  • January was revised to a gain of 68,000 from a revision of 63,000 and an original reading of 36,000 gain
  • Payroll processor ADP reported an employment gain of 217,000 jobs
    • 46% of the 217,000 came from small business (firms with less than 50 employees)


  • 6.0 million people have been jobless for more than 6 months (long term
    unemployed) – down from 6.2 million last month
    and 6.4 two months ago

    • 43.9% of the unemployed are long term unemployed – up from 43.8% last month (the overall population count has changed resulting in one number improving positively, but another appearing to be negative compared to last month)
  • Employers
    announced plans to cut 50,702 jobs in February, a subdued number but a year over year increase (42,090 in Feb 2010)

Unemployment rate dropped to 8.9%

  • Analysts predicted it would rise to 9.1%
  • The unemployment rate dipped below 9.0% for the first time 21 months
  • Last month there was an oddity of a low increase in jobs but a large drop in unemployment rate. After further inspection this is the result of an unusual squeeze of the components to this equation Number of people in the workforce (civilian labor force) – number of people with jobs (employed) = number of unemployed people.
    • The civilian labor force shrunk a little more than a normal drop with people dropping out of the labor force and the number of people with jobs increased a touch resulting in a significant drop in the unemployment rate
    • The “Not in Labor Force” number rose by 2.4 million people from February 2010 to February 2011

  • The labor force
    participation rate is 64.2% (66.5% is average to good) – unchanged
  • The employment to population ratio is 58.4% – unchanged
  • The
    U-6
    report, which is a broader group to count (workers who are part
    time but want to be full time and discouraged worker), dropped to 15.9% from 16.1%.
  • PMI,
    a measure of manufacturing pace, is 61.4% and the 21th consecutive
    month of readings over 50 percent. Anything above 50% means the
    machines are running
  • Service
    sector activity rose to 59.7%, up from 59.4% last month. It was the
    15th straight month of growth

Specific Segment Job numbers:

  • Manufacturing gained 33,000 jobs
  • Construction gained 33,000 jobs (lost 32,000 so an even start to the year)
  • Retailers lost 8,100 jobs
  • Leisure and Hospitality Services gained 21,000 jobs
  • Government sector lost 30,000, all state or local
  • Education and Health Services grew by 40,000 jobs
    • Health Care and Social Assistance grew by 36,200

  • Professional and Business Services grew by 47,000
    • 15,500 jobs gained in Temporary Help (lost jobs last month after several months of gains)

Wage (can be revised):

  • The average weekly paycheck (seasonally adjusted) is $647.56 – an increase of $1.94 and a $3.35 positive change from December, 2010. $19.08 gain in the last year (there’s been low inflation so this is good)
  • The average hourly earning (seasonally adjusted) is $19.33 – flat from last month
  • Average
    weekly hours and overtime of production and nonsupervisory employees on
    private nonfarm payrolls by industry sector, seasonally adjusted is
    33.5 hours, up slightly from 33.4

Bureau of Labor Statistics

January 2011 Jobs Report and Wages

Here are the job market and compensation numbers for January 2011 (based on the job report):


Net gain
of 36,000 jobs in the month
(revised in March to a gain of 68,000)

  • Analysts expected an overall gain of 149,000
  • Private sector payrolls increased by 50,000
    • Private service producing industries added 32,000
    • Goods producing industries gained 18,000


  • December was revised to a gain of 152,000 from a revision of 121,000 and from an original reading of 103,000
  • November was revised to a gain of 93,000 from a revised reading of 71,000 and an original reading of 39,000 gain
  • October was revised to a gain of 171,000 from a second revision of 210,000 a revised reading of 172,000 and an original reading of 151,000
  • Payroll processor ADP reported an employment gain of 187,000 jobs (a revised 247,000 jobs in December, 2010)
    • The ADP survey and the Jobs Report survey aren’t usually this varying in their results, which, coupled with other data, makes people think the economy is shifting and the models used in the Government report are not currently effective

  • The Labor Department estimates there were 886,000 workers who had a job but couldn’t get to work due to weather (5th largest account of this situation) – if true, this means the real gain in jobs is estimated to be 200,000
  • 6.2 million people have been jobless for more than 6 months (long term
    unemployed) – down from 6.4 million last month

    • 43.8% of the unemployed are long term unemployed – down from 44.3% last month and up from 41.9% in November, 2010
  • Employers announced plans to cut 38,519 jobs in January, a 20% increase over December, according to outplacement consulting firm Challenger, Gray & Christmas. This is a really low number because it usually averages just over 100,000 for the month of January every year
  • Benchmark revisions were made for April 2009 to March of 2010 and show combined additional loss of 215,000 jobs during that period
  • Overall, it was a  confusing report – the numbers seem to contradict each other

Unemployment rate dropped to 9.0%

  • Analysts predicted it would rise to 9.5%
  • The 0.8% drop in a span of two months is rare: only 4 larger two month declines on record and those were in the 1940s and 1950s
  • The unemployment rate has been at 9% or higher for 21 months
  • Normally, when a decrease in the unemployment number happens without a very large number of new jobs it means people have dropped out of the count, but that isn’t the case this month – this is odd (504,000 people did drop out though)
  • The labor force
    participation rate is 64.2% (66.5% is average to good) – relatively unchanged
  • The employment to population ratio is 58.4% – relatively unchanged from 58.3% last month
  • The
    U-6
    report, which is a broader group to count (workers who are part
    time but want to be full time and discouraged worker), dropped to 16.1% from 16.7%.
    This reflects an even greater decrease seen in the overall unemployment rate (9.0% from 9.4%)
  • PMI,
    a measure of manufacturing pace, is 57% and the 20th consecutive
    month of readings over 50 percent. Anything above 50% means the
    machines are running
  • Service sector activity rose to 59.4%, up from 57.1% last month. It was the 14th straight month of growth and the highest reading since August 2005
  • 2010 fourth quarter productivity is reported at 2.6% and annualized at 3.6%

Specific Segment Job numbers:

  • Manufacturing gained 49,000 jobs
  • Construction lost 32,000 jobs
  • Retailers gained 27,500 jobs
  • Leisure and Hospitality Services lost 3,000 jobs
  • Government sector lost 14,000, Federal lost 2,000
  • Education and Health Services grew by 13,000 jobs
    • Health Care and Social Assistance grew by 12,900

  • Professional and Business Services grew by 31,000
    • 11,400 jobs lost in Temporary Help (had been gaining for several months)

Wage (can be revised):

  • The average weekly paycheck (seasonally adjusted) is $645.96 – an increase of $1.42
  • The average hourly earning (seasonally adjusted) is $19.34
  • Average
    weekly hours and overtime of production and nonsupervisory employees on
    private nonfarm payrolls by industry sector, seasonally adjusted is
    33.4 hours

Bureau of Labor Statistics

Job Report Stats Summary

The Train with No Known Destination

Last week news broke of Eric Schmidt leaving the CEO post at Google. He’s replaced by Larry Page. Speculation is that Schmidt no longer felt he was in control of the company. The triumvirate of Sergey Brin, Larry Page, and Eric Schmidt had become a duopoly of Brin and Page, the founders. The genesis of their relationship is rooted in the need for someone who knew how to run a big company – Schmidt. Around 2000 when Google was  preparing to go public it was growing at an immense rate. The size of the company had surpassed the experience level of 20 somethings. The founders would concentrate on a start up atmosphere of constant disruption. Disruption is where money is made.

At some point, every successful company grows out of it’s novelty state. The disruption becomes the norm. Competitors look for weakness and stagnant ideas. Being a perpetual start up is the dream of people like Brin and Page. But how do you do it?

Intelligent continual employee turnover.

The enterprise must become a train with no known destination, just stops letting people get on and get off. When the enterprise becomes “the destination” then protection ensues. People can be very good at their jobs, but if they are doing the same thing for more than three years then you have to wonder why? Why isn’t the job evolving? Why isn’t it automated? Why is it needed?

Many large companies, including Google, want to be smaller. Being nimble is key. But wanting a start up mentality and structurally building it in to the culture is not the same. There are a lot of tough conversations to be had. For instance, Netflix has a running practice of “adequate performance gets a generous severance package” and they apply a keeper test which is pretty simple: which people would you fight to keep, at any cost, if they told you they were leaving in two months? This is supplemented by honest conversations about the employee’s commitment and ability to deliver. No surprises.

The NY Times in their weekly section called The Corner Office interviewed Jeremy Allaire, chairman and chief executive of Brightcove. He talked about his conversations with his work force. He said he asks them “What are you trying to do? Where are you trying to head?” This survey reinforces the need to be ever improving.

When the culture of the company is to evolve the job, to morph it, to leave it, or to destroy it (automate) then, as an employee, you know when it’s time for a change. Just ask Google.

Tracking Employment News

14 million people are without jobs. Imagine everyone in NYC, Chicago,
Philadelphia, and Dallas without a job. That’s almost 14 million. I
mention this because the tone of the news regarding employment has
improved since the beginning of fall 2010. It’s almost like we’ve been
on this long road trip and we can finally see the skyscrapers in the
distance. There’s miles to go, but hope is in sight.

I mentioned a few posts ago about the value of the A employee.
I said they are changing the dynamics of the job market and I praised
them. But I can’t pin them down. Sometimes they are the 35 year veteran
and other times they are the 35 year old hitting their stride. Youth
often prevails and so does being a woman. You just never know.

Anne Fisher over to Fortune.com highlighted a great resource for seeing who’s hiring called A Real-Time Look at Who’s Hiring and Where. Vault.com has a tool called Vault Employment Tracker. It’s a simple database organizing all the job announcements.

Date http://www.vault.com/images/icons/desc-arrow.png

Company 

Layoffs 

Hires 

Notes

Industry 

Info

01/18/11

AM General

300

0

AM will layoff 300 workers after the military reduced its order for Humvees.

Manufacturing

More

01/18/11

Unified Solutions Inc

228

0

Manufacturing – Other

More

01/18/11

Karachi Electric Supply Company (KESC)

4000

0

The layoffs are part of a cost-cutting drive to make the power utility financially viable, sources said on Friday.

Energy

More

01/18/11

Johnson Controls Inc.

0

250

The auto parts planct broke ground on its battery recycling plant in Florence, S.C.; it’s set to be finished next year.

Manufacturing – Other

More

01/18/11

Sam’s Club

0

170

The company is looking to hire every position from cashiers to supervisorsat its new location on  in Riverview, FL.

Department Stores

More

01/14/11

Berkeley College

150

0

Affected employees–non-faculty-members–will be let go by June.

College and University Education

More

01/14/11

Lockheed Martin Corporation

1000

0

LM, which is closing its Eagan plant in 2013 is cutting 250 jobs altogether, down from the original 350 anticipated.

Aerospace and Defense

More

01/14/11

Public Health-Seattle and King County

123

0

Nurses, social workers and other staffers were let go as a result of a 50% budget cut to an aid program for low-income pregant women and babies.

Insurance

More

01/14/11

Sterling Life Insurance

80

0

Sterling is adjusting to reduction of enrollment in one of its key products.

Health Insurance

More

01/14/11

SoloPower

0

170

SoloPower said Thursday that it is opening up a new, solar panel manufacturing facility in Oregon

Manufacturing

More

November 2010 Jobs Report and Wages

Here are the job market and compensation numbers for November 2010 (based on the job report):


Net gain
of 39,000 jobs in the month

  • Private sector payrolls increased by 50,000
    • Down from 160,000 last month
    • Worst performance in 10 months

  • Analysts expected an overall gain of 150,000
  • September was revised to a loss of 24,000 jobs from an original reading of 95,000 lost and a revised loss of 41,000
  • October was revised to a gain of 172,000 from an original reading of 151,000
  • The revisions for August, September, and October added 145,000 jobs to the economy
  • 6.1
    million people have been jobless for more than 6 months (long term
    unemployed) – virtually unchanged from August, September, and October

    • 41.9% of the unemployed are long term unemployed – inched up from 41.8% last month and 41.7% the month before
  • The main type of hire was for Temporary Help Service (+40,000) and since September of 2009 this employment has improved by 494,000
    • Its normally an indicator of an improving economic cycle, but a year of it indicates uncertain business conditions

  • Job Openings and Labor Turnover Survey (JOLTS), shows that job openings increased by 351,000 in October
  • The total number of job openings in October was 3.4 million, while the total number of unemployed workers was 14.8 million
  • The ratio of unemployed workers to job openings improved to 4.4-to-1 in October

Unemployment rate went up to 9.8%

  • Analysts predicted it would be 9.6%
  • The unemployment rate has been over 9% for 19 months – the longest such streak since the early ’80s
  • The employment to population ratio is 58.2% – relatively unchanged
  • The
    U-6 report, which is a broader group to count (workers who are part
    time but want to be full time and discouraged worker), stayed at 17.0%. This indicates the increase of the unemployment rate to 9.8% is a reflection of more people actively looking for jobs in November (these individuals are only counted if they are actively looking)
  • The unemployment rate for those with a college education is 5.1%
    • Highest in 40 years

  • PMI,
    a measure of manufacturing pace, is 56.6% and the 19th consecutive
    month of readings over 50 percent. Anything above 50% means the
    machines are running
  • Productivity, measured for the quarter, showed tepid growth of 2.3%

Specific Segment Job numbers:

  • Manufacturing lost 13,000 jobs
  • Construction lost 5,000 jobs
  • Retailers lost 28,100 jobs
  • Leisure and Hospitality Services gained 11,000 jobs
  • Government sector lost 11,000, Federal gained 2,000
  • Education and Health Services grew by 30,000 jobs
    • Health Care and Social Assistance grew by 34,000

  • Professional and Business Services grew by 53,000
    • 39.500 jobs added in Temporary Help

Wage (can be revised):

  • The average weekly paycheck (seasonally adjusted) is $642.87 – a decrease of $1.91
  • The average hourly earning (seasonally adjusted) is $19.19
  • Average
    weekly hours and overtime of production and nonsupervisory employees on
    private nonfarm payrolls by industry sector, seasonally adjusted is
    33.5 hours

Bureau of Labor Statistics

Job Report Stats Summary