Microsoft leaves many sleepless in Seattle

By Elaine Porterfield and Edwin Chan

SEATTLE/LOS ANGELES (Reuters) - For affluent Seattle, Microsoft is just the tip of the iceberg.

Microsoft's announcement it will lay off 5,000 in its biggest-ever job-cut rippled through the Seattle area on Thursday, further unnerving residents of an already-bruised city of just over 3 million.

The city plays host to a spate of well-known corporations, some of which have recently announced layoffs, including Starbucks Corp , and Boeing Co.

Starbucks said on Thursday that it will freeze salaries for its top executives.

Employees at Microsoft's sprawling, tree-lined campus in Redmond -- just 13 miles from Seattle -- filed in to work in somber moods, though many had been bracing for weeks for just such an announcement. Executives say managers called hurried meetings to talk through the changes.

For some, the news came almost as a relief after weeks of tense speculation and in the midst of the worst financial crisis since the Great Depression. For others, Microsoft's warning that cuts will be spread over a year and a half means a lengthy period of anxiety.

"There's definitely a lot of black humor now" in the hallways, a Microsoft executive said. "People are joking around like: 'we better get back and see if we still have jobs'.

"The one thing that might have raised eyebrows is: 'why're they putting this cloud over our heads for the next 18 months?'"

Seattle, the city in Washington state well-known for drizzle, cafes and the TV series "Frasier" is feeling its fair share of corporate pain.

Washington state's jobless rate rose in December to 7.1 percent -- just a tad shy of the nation's 7.2 percent, from 6.4 percent in November.

Washington Mutual Inc -- once the largest U.S. savings and loan but since collapsed and taken over by JPMorgan -- will shed 9,200 jobs.

About 3,400 of those jobs will come out of Seattle, the Seattle Times reported last month.

Boeing Co unveiled plans this month to cut 4,500 workers -- most of them in Washington.

And Starbucks -- the brand virtually synonymous with Seattle's boom -- is in the midst of layoffs of potentially thousands, though executives would not specify a final number.

"This is the worst economy I've seen in my life. The way Seattle is shedding jobs reflects what's happening elsewhere," said retiree Conrad Shock, 58, as he sipped at a coffee in Starbucks's first store, opened in 1971 in downtown Seattle's historic Pike Place market.