This article examines the extent to which the new economic institutional environment, the investment cycle, and the effects of industrial changes are affecting the labor market in São José dos Campos, São Paulo, Brazil. In the late 1990s, the region underwent a phase of economic prosperity with a major renewal of its technological complex, increased production, and employment sustained by the aircraft industry. Additional factors enter into the analysis: the persistence of a high threshold of overall unemployment throughout the 1990s; the dissemination of new quality and productivity programs with the partial and selective adoption of Japanese-inspired production management techniques; investments in the expansion of installed capacity and incorporation of new high-precision, high-speed equipment; a heavy demand by the aircraft industry for specialized engineers and other professionals, leading to a scarcity in some occupations such as quality technicians and aeronautics engineers; and expanded strategies for outsourcing production and services. Meanwhile, accelerated globalization of commercial, industrial, and technological activities in the aircraft industry produced a paradoxical trend involving concentration of innovation networks with multinational companies located outside of Brazil from the global production chain, and the strengthening of the firm's innovation system as compared to a weakening of the regional STI (Science, Technology, and Innovation) system. Thus, although the technological and employment opportunities created in the process have increased and been important, they have been insufficient to spawn more linked and integrated regional development for the local industrial sector as a whole.