Saturday, July 23, 2011

What the Boom in Silicon Valley Means for the Rest of the Economy

The epicenter of the latest manipulated Federal Reserve boom is Silicon Valley. New IPO's are streaming out of the area and employment is climbing.

California as a whole had an estimated 14.1 million non-farm payroll jobs last month, up by almost 157,000 from June 2010, for an annual increase of 1.1 percent.

The gains, however, are largely in tech-focused areas, especially San Jose and the broader San Francisco Bay Area. In the last month, net job gains in just five Bay Area counties totaled 44 percent of all gains in California employment.

As money seeps in to the economy the employment picture will climb across the country, just keep in mind that employment is a lagging indicator. Silicon Valley is just the start. They are getting the money first. There are likely other entry points as well, such as the midwest farming belt.

 If you want to look at a broader leading indicator, look as the stock market, which is turning strong again.

Ben Bernanke runs a very erratic monetary policy, but it looks like for the time being it is an accelerating monetary policy, which means continuing strength in Silicon Valley that will spread over the economy. I hasten to add this monetary policy is about accelerating money printing that will also lead to accelerating price inflation.

1 comment:

  1. We've been following this story as well. The important thing to keep in mind is how narrow this "boom" really is: tons of money are flowing into Valley tech start-ups, engineer salaries are rising, and home prices in tonier areas are soaring; yet even in the Valley, unemployment is above the national average. A telling sign comes from the June employment numbers: the Valley added a lot of jobs, but the unemployment rate actually shot up; the state estimates that Santa Clara County (San Jose, Sunnyvale, Palo Alto, Mountain View, Los Gatos, Los Altos) jumped over 10% last month. The reason? "Out of the labor force" describes a very large segment of California's population, and the good news in the Bay Area is leading many of these folks to start looking for work again. Yet, unless they offer a very specific set of skills, they're finding the job market is still very weak here.