Ike,
Although I am a regular and avid reader of this thread, I don't post often. For the past 12 years, I have owned an Architectural Engineering business in the San Francisco Bay Area with many of the fortune 100 companies as our clients. As a means of growth in our past 12 years, consistently we have run an ad in the local newspapers and hired new employees.
For the past 2 weeks, we have been running an ad for administration and accounting personnel. For the first time in 6 years, I am amazed at the number of respondents for these positions. Compared to a year ago, we received 300% to 400% more response to our ads. More amazing was the information I received from some of the interviewees. For example, I interviewed with a very competent individual admin assistant who had made it a career in the past few years as a temporary employee. For the past 3 years, her agency had no problem placing her in positions making $18/hr, working 55 to 60 hours per week (time and a ½ above 40 hours), and she made more money than any full time position would have paid her. Today she said that work has dried up. Their temp agency has considerably slowed down. Her sentiment was echoed by a number of people that I interviewed. They all said, there aren't that many openings right now. Clearly, it seems employment growth has slowed down and unemployment is on the rise in the Silicone Valley, the barometer of the tech sector.
<<The Internet Economy-As the Web turbocharges growth, it's bringing fresh risks >>
I believe the Internet and newer technology is having a “churning” effect on the economy. While some companies ride the wave new cheaper avenues of gaining market share, others are being driven out of business. One of my tenants has a very well established printing business. Their business is the traditional 4-color process, making brochures and other such publications. It was less than a year ago that she not only wanted to renew her lease, she wanted to get more square footage for expansion. Last week, they laid off 50% of their work force just to stay afloat. The reason they stated, Internet and other color printing technology is having a severe impact on sales of their traditional printing business.
I believe this is why we are seeing such a divergence between some of the market leaders versus the breadth of the market. Technology and productivity gains that we are experiencing are changing the rules. It is survival of the fastest, being in the right place at the right time is more important than how well established you are.
If in fact unemployment is on the rise, that means there are less chance that Fed will cut rates. It also means that profit growth is slowing down. What does it mean for the stock market, especially the tech sector?
BTW, based on some of the interviewees this past week, SUNW is laying off a lot of administration and accounting staff. Apparently, they are over extended from foreign shipments and are unable to collect on debts. If SUNW fails to break the double top formation, it probably is a good short.
Allana
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