Have IT vendors been hit harder than IT departments?
Comment: Less hiring, more firing, but still a net gain
I don't know about you, but I keep wondering where the disconnect is between the US unemployment rate and IT departments. And if there is a disconnect, as there seems to be from looking at the data, I am grateful on both your behalf and my own. The rest of the IT Jungle team is grateful, too. None of us - you, me or them - wants to become a statistic.
Here's what I am talking about. Last Friday, the US Labor Department's Bureau of Labor Statistics did its monthly report on employment (or lack thereof) in America, and the news was not good. The latest BLS models (and it is a model, since these figures are seasonally adjusted) indicate that 651,000 people lost their jobs in February, boosting the total number of people who have been knocked out of work since the recession began in December 2007 to just a bit more than 4.4 million.
The unemployment rate is now 8.1 per cent, and it was hovering around 4.5 per cent in late 2006 and early 2007, before the full extent of the mortgage and derivatives mess was known. The number of people unemployed in December and January were revised upward, by the way, so in a month, the February unemployment numbers could be revised upward as well.
The monthly BLS report doesn't track IT jobs directly, but does track job gains and losses by industry at a fairly fine level of detail. So you can sort of track the IT vendor community's employment status in the States even if you can't get a good picture of IT departments. It would be far better, as I have argued, for the BLS to do its industry tracking, as it currently does, but also track jobs by title. Then we could reckon how MIS managers or programmers are doing out there.
Anyway, if you add up the bits of the monthly report that are IT-related - computer and electronic component manufacturers, telecommunications companies, data processing and other services, and computer systems design - then 15,400 jobs were deleted in February. That's using the seasonally adjusted data.
If you just look at the raw data, computer and electronic makers employed 1.25 million people in February 2008, but that number is now 54,000 people lower as of February 2009. (I don't trust seasonally adjusted numbers except in a normal, growing economy - and maybe not even then.) Employment in data processing services was 265,400 a year ago, but has shed 12,700 people. The telecom biz had 1.03 million people a year ago, but now has 36,700 fewer people.
Here's the funny bit: using the raw data, companies engaged in computer systems design and related services had 1.42 million people on the payroll in February 2008, and using the unadjusted data, this has grown by 32,300 according to the BLS. So if these four areas are indicators of the overall IT vendor community, the net loss in jobs for the whole year is 71,100 jobs against a base of 2.55 million employees in February 2008. This is about as bad as the economy as a whole, which (again, using the unadjusted numbers) has shed just over four million of the 136.4 million jobs that were there in February 2008. The overall U.S. economy has lost 2.9 per cent of its jobs by this math (that is not the same thing as the unemployment rate) compared to 2.8 per cent of jobs for this IT vendor segment I have carved out of the BLS data.
Now, what has me a bit perplexed is why some chief information officers are adding staff. With IT spending down, the experts at Robert Half Technology who recently polled 1,400 CIOs say that eight per cent of CIOs will hire new people in the second quarter, with only six per cent saying they will drop IT employees; 83 per cent of those polled said they would keep staffing levels the same, leaving three per cent who seemed to be too confused to answer the question.
RHT polled companies in the United States with 100 or more employees to get a sense of what is going on, and while that net two per cent increase in companies hiring is a lot smaller than the eight per cent CIOs reported in the first quarter, it is still positive.
"Not surprisingly, companies are being more judicious when hiring in today’s economic environment," explains Dave Willmer, executive director at RHT. "Budgets must support critical IT projects, and companies are re-examining their staffing needs accordingly. Among the areas where demand remains stable are help desk and technical support, and networking."
No surprises here
The cost of delaying a purchase is only an opportunity cost to the business. Laying off people if you expect to recover has the potential to be a huge cost. First off, you have the increases in taxes (otherwise known as unemployment insurance rates) for laying off the employees. If you employ more than 50 people, you have regulatory costs involved in making certain you jump through all the right hoops, and potential legal costs if somebody decides your paperwork wasn't in order or you discriminated against them for some unfathomable reason or another. Finally, when you do recover, odds are your former IT employee has found another job somewhere else, which means you'll spend 6-8 weeks looking for his replacement, and a year or more training him to be useful within your corporate structure. So in the initial stages of a downturn (and make no mistake about it, despite it's depth, these are still only the initial stages) you cut purchasing, not people. That impacts the manufacturing sector (Dell, HP, Lenovo) not the service sector (Programming, Networking, Help Desk). Furthermore, the pause in purchasing allows the IT shop time to focus on some of those items that further down the To Do list that only require time but normally get pushed back because they don't want equipment idling.
Oh, and the unemployment numbers aren't behaving normally this time around either. Normally after some amount of time people do normally stop looking for work and wait for the economy to get better, and those numbers properly drive down the unemployment rate. This time they aren't. Whether people think this is really different from the last few downturns in that it is going to be a long hard slog like the Great Depression was so they'd better keep pounding the pavement, or if it is that their asset losses have left them hurting so much they HAVE to be out looking for a job, they are looking for a job longer.
What are you some sort of monkey? You are counting people that are retired and take a part time job as bein unemployed? Or students that study almost 40 hours a week and work 20 hours for a bit of pocket money as being unemployed??!! So you are cooking the books to inflate numbers, yeah, that is good, we need to count new borns as being unemployed as well as the retired. It follows your logic, BTW, maybe we should count the people that are not working after 1700 as unemployed too, becuase they are at that time. I mean that would boost the unemployment rate to almost 60 or 80%.
Paris, cos she is unemployed, but I have a job for her.
Sad but true?
Organisations with shareholders have responsibilities to shareholders and at a lesser extent to employees unless it is a co-operative type employer (based on UK stuff).
Departments have responsibilities to do what senior managers instruct them to do and in accordance with that oprganisations policies.
Upshot: directors of organisations will seek to make similar returns (eg match last business year returns) to shareholders and make the required changes in order for it to be so.
In A Nutshell
IT: what was once lamented as grossly understaffed is now thankful for keeping what it has. Same numbers, just new paradigm.
Damn AC, is the Pope worried about you? I mean, he may be the good right hand of the wrong "person".
Might be because, as an industry, IT has had more recent experience with recessions/contractions than other economic sectors. To wit, around 2001 when IT was double whammied by the deflation of the dotcom bubble and the completion of Y2K projects.
In short, we're ahead of the curve.