Despite surging economy, U.S. IT hiring continues to decline

The U.S. economy is on the upswing. The Dow hit a 2 1/2-year high last week, and during January, U.S. companies added employees at the fastest rate in the last three years. So with all this economic surging, IT hiring must be finally on the rebound, right? Wrong.

According to a survey issued Feb. 2 by the Bureau of Labor Statistics, companies that provide computer-system design and related services employed 1.1 million workers in January, 600 fewer than in December and 11,000 fewer than January 2003. All other nonfarm industries added 112,000 jobs last month, the fastest hiring increase since 2000.

Since peaking at 1.35 million in March 2001, the computer-systems design and related services category has lost 245,000 jobs, an 18.2% decline. Jobs in this category are hovering at their lowest level since April 1999, according to the BLS. The figures are seasonally adjusted; the December and January numbers are preliminary and may be revised at a later date.

The jobs classified as computer systems design and related services are traditional IT positions found in consulting, outsourcing, and integration companies. But they also could include jobs situated in separate IT units within companies producing other types of products and services. For instance, jobs found in an IT subsidiary that supports a large consumer manufacturer could be included in this category.

The BLS survey confirms a feeling that many in the IT industry have had for some months now: despite the resurgence in the U.S. economy, there are fewer IT positions available now than at any time in the last several years. A study of BLS data from 2003 showed IT unemployment at around 5.6%, a tenth of a point higher than the rest of the U.S. market.

Why is the IT services industry bucking the general U.S. employment trend? There are a number of likely reasons, but the simplest among them is continued cost-cutting. IT services organizations today are all doing more work with fewer people than at any time since the beginning of the decade. Both internal IT shops and third-party services are affected by this trend – neither the outsourcing providers nor their clients are expanding their staffs.

This reduction in staffing has been enabled, in part, by better automation of technology. Improved capabilities for everyday functions, such as provisioning and configuration management, are making it possible for some IT organizations to support the same number of end nodes with a smaller number of people. Similarly, Web-based and self-service technologies have empowered end users, decreasing the need for service desk and support personnel.

Offshore outsourcing may also be contributing to the stagnancy of the U.S. IT employment market. Although recent numbers show that offshore outsourcing still represents only a small part of the employment pie, many detractors maintain that the recent trend toward using offshore resources for manpower-intensive tasks, such as application development, is affecting U.S. hiring practices. The BLS has not collected any data on the offshore outsourcing phenomenon, but a spokesperson said the bureau is considering such a study.

No matter what the drivers behind the trend, it seems clear that – at least in the near term – there will be no commensurate increase in IT employment as a result of the recent economic resurgence. Obviously, if the turnaround is sustained, enterprises will eventually have to give in and add staff, either through outsourcing or internal hiring. But old trends are hard to break – and it seems the IT industry isn’t out of its woods yet.