I graduated (with an engineering degree) at about the bottom of the
recession. (12/01)  I spent my most of my college career in southern
California in an Engineering program and intended to go to the Silicon
Valley once I graduated.  At the time, jobs were plentiful.  I knew
nobody from Northern CA, I had no contacts -- everyone I went to
college with stayed local.  Up until 2001, getting jobs was trivially
easy -- now it doesn't matter what I do.  I currently live in the
Central CA Valley with family, but Bay Area job ads frequently state
"local candidates only" -- which means I don't exactly qualify. (Even
though I'd like to become local.)  I'm beginning to think most of the
lower level tech ads I see on websites are phantom ads -- I assume the
HR people didn't want to wade through 10k resumes for most positions
so they simply hired an someone an existing employee knew.

I have attempted to get jobs locally. I have had some interviews. In
the 3 interviews I've had, I have been dismissed as overqualified. 
(The only thing I could find was technician level jobs -- which would
be fine -- but the potential employers didn't think someone with a 4
yr engineering degree would stay.)

The area where I have some experience, video/TV oriented engineering,
seems to be in the toilet. The TiVo's, Sonic Blue's, Liberates,
OpenTVs, and others seem to be on the brink of collapse or just
bringing in a fraction of the revenue they used to have. 
Irregardless, if they have entry level engineering positions -- they
aren't advertised.
 
I've read the "how to find a job" books which basically say what I
already knew -- "It helps to know someone."  I've gone to the Bay Area
and looked for help wanted signs, read the papers, applied for
anything that seemed the least bit viable.  However, I can't afford to
just show up in the Bay Area and hope something will come up.

I don't have enough experience for mid level positions, the entry
level stuff seems to have evaporated, and I can't get anyone to talk
to me at places where I think I'd be a good fit.

What should I do?

Back in 1995, I found a job in the Bay Area from the Usenet newsgroup
ba.jobs.offered from across the country in under a week. You can
access it via Google at
http://groups.google.com/groups?hl=en&lr=&ie=UTF-8&group=ba.jobs.offered

Of course, it was much easier to find work back then, but I've found
that the jobs posted on USENET were of the more urgent "must fill
A.S.A.P." nature, and thus they were less picky about who they
accepted. Anyway, once you have a job in the Bay Area, it is easier to
take your time and find a more ideal position (once you've put in at
least six months in the other one, of course...)

Good luck!

stick with  http://www.craigslist.org/
and you'll find a job

Hate to say it, but been there -- done that.. Checked Craigslist,
which I don't find has much breadth and the layout is mediocre, and
USENET is just a spam emporium.

The Lockheed Martins (Texas) of the world are swimming in resumes. 
I'd be lucky if they ever plucked mine out of a computer as I've never
done anything aerospace oriented.

So -- knowing the economy (I could be imaging things, but it's not
getting better.) is a total disaster and there are tons of qualified
people out of work..  What does a recent graduate do?

Sorry to hear that Craigslist didn't meet your needs!  It's been
around for a long time and many people love it - the "mediocre" layout
usually gets props from people tired of graphic heavy sites with ads,
etc.   If you only checked it out once or twice, I recommend visiting
it a few more times.  Many people have had great success with it. 
Sorry if I sound like a commercial - I just know some people really
like the site.