Skip to comments.Tech Layoffs Fading, But No Hiring Boom
Posted on 10/20/2003 11:09:52 AM PDT by Afronaut
Tech Layoffs Fading, But No Hiring Boom
Monday October 20, 10:37 am ET
By Jed Graham
While IBM's earnings report Wednesday didn't thrill investors, its plan to add 10,000 jobs next year offered the best tangible hope yet that tech-sector job woes could be ending.
IBM said it's confident about the prospects for technology spending and the economy and will add positions in "key skill areas," including high-value services, middleware and Linux.
Still, IBM didn't say how many of those jobs will be in the U.S. Recent reports have said IBM plans to boost staff in India to 10,000 by 2005 from less than 5,000 now.
The tech sector was a big driver of employment gains in the '90s and could play an even bigger role in deciding the health of the labor market. As some old-line manufacturing industries move overseas, the U.S. will need to provide high-skill, high-tech jobs to replace them.
Industry watchers see reason for modest optimism as recruitment picks up and layoffs wane at companies that went into cost-cutting mode after the tech bubble popped. That optimism is tempered by the shift overseas of tech production, computer programming and even some high-level research and development jobs.
"There's been some lift in hiring at small companies, but we're still looking for the new, new thing that will really be an engine of growth," said Monster.com CEO Jeff Taylor.
While Monster.com job postings rose 11% in September, listings for hardware and software jobs rose 33% and 28%, respectively, Taylor says. He said tech employment "got dramatically smaller in the last 2 1/2 years."
Other indicators have yet to demonstrate a noticeable turn.
Tech firms announced plans to cut 47,998 jobs in the third quarter, says outplacement firm Challenger, Gray & Christmas. That was up from 36,967 in the second. But year-to-date job cut announcements of 145,997 through September are down 56% from a year ago.
Tech manufacturing payrolls fell 3,800 in September, the 32nd straight monthly fall, the Labor Department said. That brought the cumulative decline to 484,000, or 26%. But jobs cuts have shrunk to under 5,000 the past two months, giving some reason for optimism.
Overall, nonfarm payrolls rose 57,000 in September, the first gain in eight months.
Among IT industries, Internet publishers have stopped shedding jobs, but have added just 1,000 this year. Internet service providers have cut 10,000 jobs in 2003, including 3,600 last month. And telecommunications providers have cut jobs for 30 straight months.
One sign of better things to come could be the hiring of 2,400 computer system designers in September, notes Mat Johnson, an economist at Quantit Economic Group and former technology strategist at Thomas Weisel Partners.
"The way the industry is going to get itself out of a hole is by delivering new products to customers focused on return on investment and cost savings," Johnson said.
Johnson expects tech spending to remain positive and tech payrolls to rise over the next year. But while IBM's plan to add 10,000 positions "takes quite a bit of faith," Johnson said, it probably doesn't portend anything resembling a hiring boom.
Some industries that overinvested in the '90s, such as telecom, are still striving to save costs, partly by shifting work to India, he notes.
For companies competing with the likes of IBM, Microsoft, Cisco and Dell - "the really large, solid balance sheet companies," Johnson says - there will still be a need to stay lean and mean.
"I don't think the industry is going to be this massive employment provider," Johnson said.
Ron Hira, chairman of the R&D policy committee at the U.S. branch of the Institute of Electrical and Electronics Engineers, says the cyclical slump in the tech sector that's depressed hiring has bottomed out.
But he believes the shift of tech jobs overseas is a structural change, somewhat masked by the cyclical.
The tech job market in India "is in a frenzy right now," said Hira. When he last visited India in March "that was not the case."
Something changed in the last few months in India, he said, "and we haven't seen that here."
India's 650,000 IT services work force will triple in the next five years, McKinsey & Co. predicts.
Meanwhile, the U.S. jobless rate for electrical engineers rose to 6.7% in the third quarter from the second's 6.4%, IEEE-USA says, citing Labor Department figures. It hit a record 7% in the first quarter after registering just 1% in 1997.
Although the 6.7% rate isn't much higher than the 6.1% overall jobless rate, it should be compared with managers and professionals, who have a 3.5% jobless rate, Hira says.
"It's hard to disentangle" just how much of the joblessness is due to the bubble popping and how much is due to a structural shift, Hira said. "But there are lots of highly skilled, highly qualified engineers who were employed before the bubble and are not now."
Hira says low-level programming jobs aren't the only ones being shifted offshore.
According to a May 2003 survey by CIO magazine, 14% of companies had shifted research and development offshore.
"R&D expansion is going on abroad and firms are actually moving research and design offshore also," Hira said.
That shouldn't be too surprising with so much tech production moving offshore, Hira says. The movement of R&D out of isolated central labs and closer to production has been a long-term trend to facilitate better coordination.
Too bad high-tech is moving overseas also.
India is where many IT jobs are goingf right now but China has as part of its national military strategy increasing the skills of its IT workers so many are going there.
He did say the other day, "Maybe I should be an electrician or plumber."
For some reason, the 'blue-collar' trades are scoffed at by many. Big mistake.
I'm afraid that the job cuts have shrunk ... because they are running out of jobs to cut. That's very much like the unemployment figure which is dropping ... because people are
1. running out of unemployment benefits and are no longer counted
2. are severly unemployed ... like the PhDEE who is flipping bugers or greeting customers at (Great)Wall mart
are severly unemployed = severely UNDERemployed
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