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America loses 1.9 million jobs in 11 months

IT is holding up, more or less

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Not only has the economy in the United States shed 533,000 jobs in November, but the US Department of Labor, whose Bureau of Labor Statistics released its monthly jobs report just before Wall Street opened this morning, now says many more jobs were cut in September and October than originally thought.

The good news is that thus far the IT sector seems relatively immune - and the key word is relatively - to the pressures to cut lots of employees, at least compared to other industry sectors that are losing people like there's a plague. Still, by the percentages of workforce being let go, IT is taking some hits.

A month ago, the bureau had to revise its August and September job loss estimates too, and it's entirely likely that the shocking 533,000 cuts announced in November will be revised upwards in a month or two as well. But significantly for the American psyche, this monthly job loss number has not been seen since the oil shock days of December 1974, when stagflation was crippling the US economy.

To be fair, such absolute numbers have to be reckoned against the size of the US population and its workforce - just like point drops in the Dow Jones Industrial Average are meaningless unless reckoned against the size of the composite.

According to the 1970 census, there were 213.3 million Americans in 1970, and assuming linear growth the population at the end of 1974 would have been around 222.6 million. Again, assuming linear growth from 2000's 291.4 million population census in the States, we should be somewhere around 318 million or so people here at the end of 2008. Now, assuming the workforce scales somewhat with population (which it doesn't, since a lot of families had only one worker back in the 1970s while many more have two these days, but forget that for a second), then you'd need something on the order of 760,000 job cuts to feel the same kind of impact. And adjusting for the expanded workforce, maybe something on the order of one million. Don't expect the TV and online news outlets of the world to point this out, however. They like all this hysteria.

That said, losing 1.87 million jobs, as America has in the past 11 months, is certainly not a good thing. Having an unemployment rate of 6.7 per cent, which the country now does, doesn't inspire confidence for 2009 either. But brace yourselves. It's gonna get worse before it gets better, and whatever happens in America is gonna spread all over the bloody globe.

As I explained in covering the October jobs report, there are three different areas broken out that have to do with IT directly.

The Bureau tracks employment at the companies that actually make IT gear. It also tracks jobs in what it calls the information industry, which includes publishing, moving, broadcasting, telecoms, data processing, hosting, and other information services, and the remaining area is computer systems design and related services, a subset of the professional services category in the Bureau's stats. This is obviously not a perfect way to look at the computer industry.

Also remember that the Bureau has two sets of data - the raw data for each month, and a tweaked set of the numbers adjusted for seasonality factors based on historical trends in the raw data. You can look at the raw data for November right here (pdf).

Across the computer and peripheral equipment manufacturers in the States, there were 183,700 jobs in November, down 1,200 from the revised October figures. Communications equipment makers lost 600 jobs to 131,300, while semiconductor and electronic components makers had 415,400 jobs, down 3,700 jobs since October. (This is based on the seasonally adjusted data.) When you add these three categories up, they have depleted 21,600 jobs since November 2007, about 2.9 per cent of the jobs. The total non-farm payroll in the States was just north of 138 million people in November 2007, and removing 1.87 million jobs is a 1.4 per cent hit. (This is not the unemployment rate, which is a different number that compares the percentage of people looking for work who cannot find work to the aggregate labor pool.)

That's only one piece of the IT-related employee pie, however. Within that broad "information" category that the Bureau uses, telecommunications companies shed 5,800 jobs in November, but still have a tiny bit over 1 million people on the payroll. (That will change once AT&T's just-announced 12,000 job cuts.) The data processing, hosting, and related services area tracked by the Bureau lost 1,400 jobs, with 265,200 people employed here in November. In the computer systems design and related services sector, jobs were also added in November, just as they were in October. This time around, there were 2,700 jobs added.

So the news is not all bad. But it's not great, either. With manufacturers, retailers, construction companies, and financial services behemoths shedding so many jobs, this will necessarily have a ripple effect on IT spending, which will then more than likely compel IT vendors to make more substantial job cuts than they already have so far in 2008. (I am not counting job cuts that come as a result of mergers and acquisitions in this discussion - that is a different situation.)

If there is a recovery in 2009 - by which I mean things don't keep getting worse at a quickening pace - then IT vendors might be able to ride this out. Let's hope that is the scenario that unfolds. If not, then President Obama will need to sign something I'd like to call the Information Superhighway Bill, so named to harken back to the dot-com days when money was easier to come by. I don't think such a bill has a chance in hell, either, by the way. America has bigger problems than making IT vendors some money. ®

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