Silicon Valley starts to feel the sting of layoffs

The economic slowdown has finally begun to hit home in Silicon Valley, with tech companies large and small shedding jobs in advance of what is widely expected to be a difficult year.

The scene may remind some of 2001 and 2002, when the internet bubble exploded and dumped hundreds of thousands of engineers in the area onto the unemployment rolls.

But the situation is far different this time, with the financial and housing sectors to blame, not tech.

And few, at least at this point, see the layoffs having a long-term impact on the Valley's fabled reputation as a cradle of innovation and risk-taking.

"In 2001, we were the epicentre, we were the cause," said Stephen Levy, director of the Centre for Continuing Study of the California Economy. "Now it's a worldwide recession event."

Although layoffs have just begun in the Valley - with more expected - many say employment will hold up better than it did after the dot-com bust, even as the world suffers through the most paralysing financial meltdown in a generation.

Even so, that provides little comfort for the growing ranks of unemployed IT professionals struggling to get by.

Vivek Sharma, a business systems analyst from India who is in the US on an H-1B work visa, said he was working as an independent contractor on a project for Macys.com before the company abruptly cut the cord in October.

"The job market is completely dead," Sharma said.

The unemployment rate in Santa Clara county, home to Silicon Valley, rose to 6.9 per cent in October from 6.5 per cent in September.

That's above the national level of 6.5 per cent but below California's jobless rate of 8.2 per cent.

The numbers will likely get worse. The past few weeks have seen near daily job cut announcements from Valley companies including Sun Microsystems Inc, Applied Materials Inc, KLA-Tencor Corp, National Semiconductor Corp, and Lam Research Corp.

Smaller private companies are also wielding the ax, with high-profile names such as electric car start-up Tesla Motors and social-networking site LinkedIn shedding workers.