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Feature
Outlook 2006: A Review of Economic Forecasts
As the start of the year, January must bear witness not only to a slew of short-lived resolutions, but also to the numerous forecasts of what is to come in the year ahead. We have scrutinized a selection of knowledgeable sources to compile this look at what 2006 may have in store for Silicon Valley's industries, occupations and economy.
Industries
According to the Labor Market Information Division (LMID) of California's Employment Development Department (EDD), the industries projected to produce the most new jobs in Santa Clara County from 2002 to 2012, as ranked by numeric growth, are as follows:
Industry Employment Projections: Santa Clara County (2002–2012)
Projected
GrowthProfessional, scientific and technical services Health care and social assistance Administrative and support and waste services Leisure and hospitality Information While manufacturing of both durable and nondurable goods is expected to increase by more than 26,000 jobs within the state, the industry is expected to lose 25,700 locally, with nearly 80 percent of these jobs lost in the subsector of computer and electronic product manufacturing. Research firm Gartner has identified six IT industry trends that it expects will "drive opportunity for business and the IT industry in 2006 and beyond." These trends include notebook computers, telephony, the IT job market, business process outsourcing, healthcare software, and regulatory compliance issues. Other trends to watch include mobile data (wireless applications) and self-publishing services, specifically in regard to blogging and services for posting photos and videos online.
Occupations
In regard to occupations, the job category with the greatest number of job openings in all of California–retail salespersons–is expected to generate nearly 61,000 jobs at a median hourly wage of $9.79.
Occupational Employment Projections: California (2004–2006)
Growth
Hourly WageRetail salespersons Cashiers Waiters and waitresses Combined food preparation and service workers Laborers and freight, stock, and material movers Office clerks, general Counter attendants, cafeteria, food concession... Stock clerks and order fillers Janitors and cleaners Registered nurses Only one occupation on this list within the top ten–registered nurses–has a median hourly wage higher than the state average of $15.59. In fact, of the nearly 700,000 job openings projected within the list of top 50 occupations, 77 percent fall below this statewide median hourly wage.
Many of these lower-paying positions remain on the local list for Santa Clara County projections through 2012, although the appearance of two software engineering positions on the top-five list is not surprising for Silicon Valley.
Occupational Employment Projections: Santa Clara County (2002–2012)
Growth
Hourly WageComputer software engineers, systems software Registered nurses Computer software engineers, applications Waiters and waitresses Combined food preparation and service workers Security guards Management analysts Retail salespersons Business operations specialists General and operations managers Of the ten jobs with the greatest growth projected locally, six show higher median hourly wages than the county median of $21.41, with four nearly or more than double the median.
Economy
According to the recent Santa Clara University Business Index Survey, the best phrase for describing local business leaders' outlook on Silicon Valley for the first half of 2006 is "mildly optimistic." Despite a mixed employment outlook and housing bubble, the nation and the state continue to show signs of recovery.
Although expectations are dim that the U.S. economy will match the current expectations of 3.4 percent growth in 2006, 45 of 50 business economists surveyed by Blue Chip Economic Indicators expect growth of at least 3 percent.
Other predictions from this survey include:
• An increase in household disposable incomes (+3.2 percent)
• Small increases in interest rates–short-term to average 4.5 percent and longer-term to average 4.9 percent–which would lead to costlier borrowing.
• A slight increase in the nation's consumer price index (+3 percent), indicating moderate inflation.
• An increase of nearly 8 percent in corporate earnings, which falls short of the growth seen in 2005.
• A continuation of the current national unemployment rate of 5 percent.Within California, housing remains the key economic concern. UCLA's Anderson Forecast of economic indicators expresses concern over the state's housing market and a fear that the economy will suffer if the "housing bubble loses too much air too quickly." Signs of this housing-led slowdown are already visible in San Francisco and San Diego Counties. Housing in Silicon Valley is reportedly still a seller's market but just barely.
The Anderson Forecast also anticipates slower growth in the local and statewide economy due to such housing-related factors as a decline in the rate of new construction, a drop in both new and resale home prices, a decline in the number of loan applications due to an increase in mortgage interest rates, and an increase in the length of time that houses remain unsold in certain areas.
A quarterly survey conducted nationally by Manpower Inc., however, shows continued optimism surrounding employment and hiring trends. Eighty-four percent of all employers surveyed plan to maintain or increase hiring the first three months of 2006 with the best prospects for employment occurring in the south and west.
Despite concerns at the local, state, and national levels, the resiliency of the U.S. economy and increases in productivity and exports indicate that growth, perhaps at a more moderate rate, will continue through 2006.
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