"I figured out that I loved Web design. It's what I wanted to do. I'd found something that I was passionate about, and I wasn't able to do it full time at Intel," she says. After marshaling a number of small business clients, she went freelance -- just as the bottom dropped out of the market.

"My clientele has gone down to almost nil," she says. "The worst part of it is that I found my dream career. I found my passion, and I'm good at it, but I can't get paid."

Magsanay is discovering that sites like Elance, where contractors bid on projects, are flooded with talent but scarce on jobs. When an attractive gig actually does get posted, it's mobbed with bids. "Sixty-five to 100 people will bid on each project, and everybody low-balls so you're not going to make any money even if you get the project."

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In February, Magsanay decided to give up the freelance lifestyle and started looking for a full-time Web design job, but she is finding the permanent job market just as unforgiving. "It's very depressing, because I thought even if it doesn't work with my own business, I'd have no problem in the job market."

Just a year after going freelance, Magsanay, who lives in the mountains above the tony burg of Los Gatos in Silicon Valley, is now considering taking a retail job in town just so she'll have some money coming in. "It's that bad. It's pathetic."

Pathetic or not, it's an extreme of the new rude reality that's set in among Silicon Valley's bathrobe set. Fire your boss! Break the alarm clock! Commute to your living room! These were the rallying cries of the contractors, freelancers, consultants and "free agents" who eagerly bought in to the Valley's vaunted hired-gun mentality. In the taut labor market of the last few years, programmers, marketing consultants, usability gurus and graphic designers found that they could turn away work and jack up their rates ever higher with no downside.

But now that the dot-com bonanza has all but evaporated and the tech sector and economy continue to cool, contractors are feeling the brunt of the abrupt slowdown, right along with their pink-slipped full-time counterparts -- just without the severance or unemployment.

During the boom of the '90s, some stalwart leftist critics argued that the hyperindividualism of the contractor lifestyle would bite freelancers in the ass when the labor market inevitably slackened. With their fortunes tied more directly to the whims of the markets, it would be the freelancers who would feel the punch first. After all, in a soft labor market, freelance peddlers of labor get slagged.

That's partially true. Today's project timelines are getting shorter. Clients take longer to make decisions. Some contracts are simply canceled. And networking events are now crowded with hungry consultants hitting each other up for work.

But as layoffs of full-time employees also become ever more popular (not to mention sudden and unexpected), it's not altogether clear that independent contractors are getting the worst of it. Their own flexibility may actually prepare them better for a tougher environment than longtime staff employees who haven't had to measure themselves against real market needs for years. Indeed, the lesson to be learned from the travails of contractors in Silicon Valley right now may be that distinctions between full time or part time, contract or "perm," don't mean all that much. In the new economy, we're all contractors now.

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