U.S. unemployment rate jumps to 8.5 per cent
Tech vendors and telcos still cutting jobs
The monthly batch of bad news came out of the U.S. Department of Labor's Bureau of Labor Statistics this morning, which reported that companies in the United States chopped 663,000 jobs from their payrolls in March, boosting the unemployment rate to 8.5 per cent.
Since the recession started in December 2007, U.S. companies have let go of 5.1 million people, with 3.3 million of them - nearly two-thirds of the total - coming in the past five months. The good news is that the numbers hit expectations and that the job losses reported in February remained unchanged at 651,000. But the bad news is that the figures for January, which had already been revised upwards from 598,000 to 655,000, have been revised again to a truly stunning 741,000 lost jobs.
Economists keep talking about how unemployment figures are a lagging indicator, meaning they show what happened in the economy a few months back, not what will happen in the future. But this seems like a very cold form of comfort, particularly to the unemployed, but also to business managers who are trying to keep their companies going.
In difficult economic times, business managers are basing their hiring and firing decisions, as well as their budgets, on what they expect their revenues and profits to be going ahead. A rising unemployment rate undermines the confidence they have in their own projections and the economy as a whole, and therefore many pull back in reaction to such news. Consumers get spooked and worry they might not keep their jobs and cut back on their own spending, and the unvirtuous cycle continues. When the unemployment rate flattens out, people will exhale, and when it goes down, people will start breathing again. Until then, the rising unemployment rate is a leading indicator, even if it does look backwards, because people keep expecting it to rise.
On the IT front, the jobs report from the BLS was mixed. Total employment among computer and electronic products manufacturers fell by 5,700 in March to 1.19 million, with computer and peripheral makers shedding 600 jobs, communications equipment makers losing 300 jobs, and semiconductor and electronic component makers dropping 3,100. (The remainder was lost at electronic instrument makers.)
In the information industry - which the BLS puts in publishing, movies, telecommunications and data processing and hosting services - the two key IT-related areas saw mixed results. Telecom companies cut 6,300 jobs, to 995,600 jobs, while data processing and hosting companies actually added 3,400 jobs, to 256,700. Jobs in this area have been rising for the past three months, but still have not reached levels from March 2008. In another IT-related sub-sector of the professional and business services sector, jobs at computer systems design and services firms cut 5,700 employees, to 1.45 million people.
None of this data actually gives a sense of what is happening at IT departments, which span all industries, because the BLS does not track jobs by title, but rather by industry.
You can check out the full March jobs report here. ®