Morgan Hill, San Martin and Gilroy have the highest unemployment rates in the county, according to recently released employment data.
About 1,600 people, or about one in 11 people in Morgan Hill's labor force, are out of work.
The Morgan Hill unemployment rate rose almost 3 percentage points since January, to 9.2 percent, approaching but not yet close to the levels reached after the 2001 dot.com bust. Unemployment for 2002 and 2003 was 10.8 percent.
San Martin's unemployment rate is 16.7 percent while Gilroy's is 10.8 percent.
"When the dot.com bubble burst, the first and hardest hit was Silicon Valley, which Morgan Hill is very much a part of," said Dennis Kennedy who was mayor at the time. "With this economic downturn, the areas that were hit hardest were in the housing (sector)," he said. Other areas in Southern and Central California were hit hardest at first, but now the effects of the housing collapse is catching up with Silicon Valley, Kennedy said.
And the news will get worse before it gets better.
Medical manufacturing plant Hospira, the city's number two employer with about 500 jobs, is closing its doors with phased layoffs over the next year. The Morgan Hill Unified School District, the city's top employer with more than 800 jobs, expects more layoffs over the summer or as early as March as the school board looks at a fiscal crisis caused primarily by the billion-dollar state budget woes.
Tammy Brownlow, senior project manager for the city's Business Assistance and Housing Services department, said early 2009 will paint a bleaker picture than 2008.
"There are a lot of people still employed in retail by stores that haven't shut their doors yet. And there are additional seasonal employees; those numbers will decrease as well," she said.
While there are more layoffs to come with the closing of Mervyns, Ross and Circuit City in the first quarter of 2009, some relief is on the way with the opening of Flextronics, Del Monaco Specialty Foods and Wal-Mart, Brownlow said.
But, she said it's hard to say how many jobless Morgan Hill residents will be employed by the manufacturing jobs to come with Flextronics and Del Monaco.
Electronics manufacturer Flextronics plans to bring 400 jobs to Morgan Hill with its Lightpost Way plant, where the international company will manufacture solar panel parts. Brownlow said the city should expect some activity there in the first quarter of 2009.
Meanwhile, officials for the wholesale food processor Del Monaco expect to employee 75 people at its new Madrone Parkway facility by mid-2010, which should open by June, Brownlow said. Del Monaco specializes in recipe production and recipe design and has clients including Whole Foods Markets and Sonoma Chicken Coop.
The new Wal-Mart in the old Target building on Cochrane Road in north Morgan Hill will start renovations in early 2009. Construction bids for tenant improvements are due the first week of January, Brownlow said.
The Flextronics facility is an expansion of the firm, while Del Monaco is transferring to a larger facility than the one in South San Jose.
Natalie Everett
Natalie Everett Natalie Everett is the education and city reporter for The Times. Reach her at (408) 779-4106, ext. 201, or neverett@morganhilltimes.com.
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