Last Friday, a weak jobs growth report

offered gloomy confirmation that market bears were in the right -- for the short term at least.

Of course, tech investors who've watched the value of their holdings steadily shrink since January would like to argue that the bad news has now been thoroughly baked into stock prices. But it's not yet clear whether the unsettling employment trend of the past few months could herald a further fall-off in demand.

The jobs report fits within a

constellation of other troublesome economic indicators, including:

  • Record high energy prices;
  • Dwindling fiscal stimulus from tax cuts;
  • Disappointing consumer spending trends, as evinced in same-store sales and declines in auto sales at GM (GM) - Get Report and Ford (F) - Get Report; and
  • A smaller top-line boost from the dollar, which has seen a relative strengthening since earlier in the year.

The breadth of the weakness has raised further questions about the notion that business spending will be able to pick up as consumers -- who've carried aloft much of the tech recovery over the past few years -- stop for a breather.

Indeed, some fund managers are minimizing their exposure to the entire tech sector. "In terms of valuation relative to growth, the stocks look fairly attractive," said Romeo Dator, co-manager of the

(GBTFX) - Get Report

All-American Equity Fund. But he said that even with more reasonable valuations, the stocks can't overcome the economic uncertainty and baleful sentiment weighing down the group.

Tech buy-siders have argued since the second half of last year that consumers couldn't indefinitely support growth in PCs and cell phones and that starting this year, businesses would likely grow comfortable enough with their newfound profits to begin shelling out some of the money on new equipment.

The notion of a corporate spending pick-up earned some support in the first two quarters of this year, with research houses IDC and Gartner reporting that corporate demand fed most of the growth in PC shipments for both periods.

But the second quarter presented at least a speed bump on the demand front, if not an outright roadblock. Already, nervous analysts have started to consider the need to whittle down their forecasts.

IDC told clients in late July that it may slightly reduce its forecast for PC shipment growth in 2005; the U.S. forecast currently stands at 10.3% (the research group won't announce any official changes until late August). Roger Kay, director of client computing for IDC, said the revision would reflect slightly weaker-than-expected results in the second quarter, but also the potential for weaker economic performance later in the year, compounded by higher oil prices and uncertainty over the outcome of the presidential elections.

Kay calls surging oil prices "disturbing for the longer term," since energy prices are a major input in economic growth, which in turn correlates closely with PC sales. "When oil hits an all-time high you might infer from that that the recovery would be more anemic than expected and maybe shorter than expected," he said.

Although it's not included in so-called core inflation statistics, rising energy costs have taken a significant bite out of the consumer pocketbook. Carey Leahey, senior economist for Deutsche Bank, said Monday in an interview on

CNBC

that higher oil prices have recently cost consumers $75 billion.

Compounding the difficulties, companies have remained stubbornly parsimonious with their IT budgets, despite surging corporate profits. "The only theory I can give you is that companies have long memories. It's been such a painful downdraft and they don't want to get caught out again," said Marc Klee, co-portfolio manager on the John Hancock Technology fund, who added that investors will be listening for clues on corporate demand during

Cisco's

(CSCO) - Get Report

earnings conference call Tuesday. "For the tech stocks to work, we need to see the enterprise come back, and it has been very spotty to date."

Yet some investors say the weak jobs number is symptomatic of the greater economic uncertainty that has made them leery of tech. "We really think tech spending depends on the growth of the economy and jobs -- almost any job requires some tech use, whether it's computers or handhelds. But in speaking to colleagues at other firms, we don't see them picking up their spending in tech. And surveys on Wall Street don't see it either, so I don't know where the growth is going to come from," said Dator, adding that inventory builds in semiconductors offer another point of worry. His fund went underweight tech in early June from a market-weight stance.

In a similarly skeptical vein, the rash

of second-quarter misses by software companies convinced Pip Coburn, global technology strategist for UBS, to surrender earlier expectations for a rally in the fall or even late summer. He now believes the

Nasdaq

will sink to 1500 or so in the next 12 months to 15 months as price-to-earnings ratios come down from the current average of 23-24, to 18-20.

Goldman Sachs analyst Rick Sherlund cautioned in a note to clients: "Going forward, the next three quarters should face increasingly tougher comparisons and include waning currency benefits, as growth slows 13%, 8% and 6%, year over year."

Unlike Coburn, however, Sherlund said that "taking a 12-month to 18-month view, industry growth should accelerate if international IT spending begins to recover."

Likewise, some pundits believe semiconductor stocks

can squeeze out another year or more of growth, notwithstanding rampant calls that the cycle has hit or neared a peak. In the meantime, the bloodletting over the past couple of months has inevitably brought out

bargain hunters, though discount hounds invariably prefer chip-equipment stocks.

"My own feeling is that tech has come in so much that it's probably overshot to the downside," said one senior trader who's considered investing in the chip-equipment space. "Put-to-call ratios are getting to bearish levels. I don't know if there's much more downside after the aggressive selloff in the Nasdaq."

John Rutledge, who manages the Evergreen Technology fund, contends that unlike 2003, this year "is a stock picker's year." Despite some slowing in the economy, he expects consumers to spend on technology items they view as necessities, including security, which should give antivirus maker

Symantec

(SYMC) - Get Report

a boost.

In addition, Rutledge said, consumers will continue to print page after page of text and photos, and that's good news for printer makers

Lexmark

(LXK)

and

Hewlett Packard

(HPQ) - Get Report

, he said. (Evergreen has long positions in the three stocks mentioned by Rutledge.)