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Tech Layoffs Fading, But No Hiring Boom
Investor's Business Daily ^ | October 20, 2003 | Jed Graham

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.

Tempered Optimism

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.


TOPICS: Business/Economy; Front Page News
KEYWORDS: business; economy; jobmarket; tech
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1 posted on 10/20/2003 11:09:52 AM PDT by Afronaut
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To: Afronaut
This may just be wishful thinking on my end, but I believe something like 50% of Microsoft's Exchange customers are still on 5.5. IMHO, the biggest reason most don't move to Exchange 2000+ is Active Directory (and cost), which presumes the customers are on NT.

When MS terminates support for either Exchange 5.5 or Windows NT, I believe you'll see a boom in IT.

Whether that boom is customers upgrading to MS products, or former MS customers migrating to Linux solutions is the big question.

All IMHO, of course.
2 posted on 10/20/2003 11:13:03 AM PDT by babyface00
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To: Afronaut; harpseal
Where are the new jobs going, India and or China?
3 posted on 10/20/2003 11:13:25 AM PDT by RiflemanSharpe (An American for a more socially and fiscally conservation America!)
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To: Afronaut
As some old-line manufacturing industries move overseas, the U.S. will need to provide high-skill, high-tech jobs to replace them.

Too bad high-tech is moving overseas also.

4 posted on 10/20/2003 11:13:48 AM PDT by WackyKat
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To: Afronaut
Message to young Americans: Don't bother learning any occupation that is done sitting in front of a computer.
5 posted on 10/20/2003 11:22:55 AM PDT by Jack Wilson
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To: Afronaut
I'll believe it when I get an offer in high tech ... out 11 weks and counting
6 posted on 10/20/2003 11:24:35 AM PDT by clamper1797 (Conservative by nature ... Republican in Spirit ... Patriot by Heart ... and Anti Liberal BY GOD)
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To: clamper1797
Out 40 weeks
7 posted on 10/20/2003 11:28:46 AM PDT by Afronaut (Live as free men, but do not use your freedom as a cover-up for evil.)
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To: Afronaut
"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."
8 posted on 10/20/2003 11:29:58 AM PDT by Afronaut (Live as free men, but do not use your freedom as a cover-up for evil.)
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To: RiflemanSharpe
Where are the new jobs going, India and or China?

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.

9 posted on 10/20/2003 11:29:59 AM PDT by harpseal (stay well - Stay safe - Stay armed - Yorktown)
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To: Jack Wilson
Thanks JW for your #5. I have a kid looking at colleges for next year and will tell him.

He did say the other day, "Maybe I should be an electrician or plumber."

10 posted on 10/20/2003 11:34:28 AM PDT by AGreatPer (Current odds on Hillary running in 04.........4-1.)
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To: AGreatPer
Maybe I should be an electrician or plumber."

For some reason, the 'blue-collar' trades are scoffed at by many. Big mistake.

11 posted on 10/20/2003 11:54:40 AM PDT by Jack Wilson
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To: clamper1797; sarcasm; BrooklynGOP; A. Pole; Zorrito; GiovannaNicoletta; Caipirabob; Paul Ross; ...
Ping

On or off let me know
12 posted on 10/20/2003 11:54:51 AM PDT by harpseal (stay well - Stay safe - Stay armed - Yorktown)
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To: Jack Wilson
Its not "scoffing". But try and understand that my friend with a PhD in engineering doesn't want his kid to be a plumber, nothing against plumbers, but try and understand. That's why tech professionals are piling their college aged kids into law schools.
13 posted on 10/20/2003 11:58:09 AM PDT by oceanview
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To: oceanview
I read somewhere, but I can't find the article, a good argument that what our kids need to be trained in for the future is entrepreneurism (phew!)...
14 posted on 10/20/2003 12:05:37 PM PDT by Jack Wilson
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To: Afronaut
But jobs cuts have shrunk to under 5,000 the past two months, giving some reason for optimism."

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

15 posted on 10/20/2003 1:10:42 PM PDT by clamper1797 (Conservative by nature ... Republican in Spirit ... Patriot by Heart ... and Anti Liberal BY GOD)
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To: clamper1797
Correction ..

are severly unemployed = severely UNDERemployed

16 posted on 10/20/2003 1:11:26 PM PDT by clamper1797 (Conservative by nature ... Republican in Spirit ... Patriot by Heart ... and Anti Liberal BY GOD)
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To: Jack Wilson
that would be fine, but access to capital is the key to business formation (more then just self employment). and for "regular" people, its hard to get.
17 posted on 10/20/2003 1:15:58 PM PDT by oceanview
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To: Afronaut; clamper1797
A friend here in San Fran just got an offer from a start up which already has big clients (you'd recognize the names) for $95,000. Things may be looking up. Hope both of you get similar offers soon.
18 posted on 10/20/2003 1:24:19 PM PDT by pbear8 ( sed libera nos a malo)
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To: pbear8
what does he do, what are his skills? don't tell me, he's a specialist in using offshore labor for US IT projects?
19 posted on 10/20/2003 1:25:42 PM PDT by oceanview
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To: oceanview
He explained it all to us at coffee after church yesterday. I still don't know exactly what it is that he does. But I do know that internet security is the company's basis and that they are currently expanding. They worked with him a few years ago and sought him out for this position. Early next year they want to bump him up to supervisor and hire two guys to work with him.
20 posted on 10/20/2003 1:41:47 PM PDT by pbear8 ( sed libera nos a malo)
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