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It was with no small alarm that I perused the monthly Dicetech job report. Published on November 11, it showed that Dice listed 75,640 IT jobs. That seems like a nice healthy number – until you realize it typically hovers around 90,000.
Still worse, looking at the site on Nov. 20 I saw the total had fallen to 70,811. (Now on the morning of Nov. 24 it has dipped to 68,606.)
Such a steep drop in such a short period – what’s going on?
Tom Silver, Dice’s chief marketing officer, tells me that recent weeks have been the worst. While Dice’s job postings are down 20-25 percent from last year, for most of 2008 the site had its usual 85-90,000 job listings. “Roughly half of that decline has been in the last four weeks,” he says.
The figures from outplacement consultancy Challenger, Gray & Christmas are similarly grim. The firm reports that tech job cuts surged in the third quarter and now threaten to reach the highest annual amount since 2003, when cuts totaled 228,000. Through October 31, job cuts by telecommunications, electronics and computer industries totaled 140,000. Almost two-thirds of these losses have been since July.
What’s disconcerting is that these cuts aren’t, say, unskilled retail jobs that are unstable by nature. This is a sharply slowing job market among some of the most educated, skilled workers. Workers that hiring agents perennially complain that they can’t find enough of. (Which is why, they explain, they look overseas.) Apparently they’re not as hard to find as they used to be.
Which begs the question: if it’s this bad now, how bad is it going to get?
Dice’s Silver, who keeps close tabs on IT hiring trends, calls it a major unknown.
“The uncertainty is fairly widespread and nobody really has any sense where this thing bottoms out,” he says. “For the near term, anyway, things are going to be fairly slow as companies assess where they can cut back.”
Given the state of the economy, it’s no wonder that the downturn has dragged tech down with it. “One needs only to open up a newspaper to know what’s happening in the environment,” Silver says.
To be sure, the current cuts are nowhere near the horrific bloodletting of 2001-02, when a staggering million plus tech jobs were axed. (695,000 in 2001 and 468,00 in 2002, according to Challenger, Gray & Christmas figures.)
John Challenger, CEO of Challenger, Gray & Christmas, doesn’t expect this downturn to be nearly as bad for tech as was the dotcom bust.
“In 2000-02, tech really led the way into the recession and was at the center of that storm,” he tells me. “This time it’s more about banking and housing and automotive – tech’s been dragged into this instead of leading the way.”
Yet as is often the case, IT staffers will bear a greater brunt than management.
“I think it will be worse for the rank and file workers. When companies have to cut they still may need a manger for the department,” Challenger says. “But every area of the company can fall under the knife. So people really do need to prove they’re essential, that if they were to leave there would be nobody else who could do what they can do.”
“That’s the surest defense – if you were to leave there would be a big gaping hole in the IT department’s capabilities.”
IT hiring, of course, correlates with IT spending, and expectations are muted at best.
“It does seem like it’s getting worse right now, not better. Even the optimists don’t think the economy’s going to turn around until the spring,” Challenger says. “Certainly business spending, which tech is so reliant upon, is challenged right now.”
Stephen Minton, an IDC analyst, notes that the research firm has recently lowered its forecast for IT spending in 2009. Domestically, “Our new forecast is that the IT market will be pretty flat, either slightly positive or slightly negative…which is much lower than we’ve had over the last five years.”
He points out that observers can extrapolate from this forecast that if companies aren’t implementing as much new IT, their need for workers will be correspondingly lower.
There are, however, a couple of possible mitigating factors in the lackluster tech job market.
The dip in the Dice job numbers may be due partially to yearly seasonal trends, Dice’s Silver says. “Some of that drop happens every year, particularly in tech.”
The fall off in job postings typically starts in mid November and runs through the holidays, usually picking back up in January, he says. Both IT recruiters and workers often put plans on hold in this period. Workers, in particular, want to stay with their current employer long enough to collect their year-end bonus.
“At least 5-10 percent” of the current drop is due to seasonality, Silver says, while noting that his calculation has an element of speculation in it. Yet at any rate, “This year will be more significant. I would expect to see a further decline in the job count between now and the end of the year. I think that’s highly likely.”
And, while Dice’s numbers suggest a cold wind blowing through tech hiring, the fact remains that IT unemployment is markedly lower than overall joblessness. The national unemployment rate has spiked up to 6.5% and is trending higher. But IT unemployment sits somewhere around 3.5%, based on the latest Bureau of Laborstatistics. “It’s all relative," Silver says.
One indicator of the health of IT hiring: the ratio of job openings that are full time vs. contract openings. Dice’s tech openings are typically 70 percent full time, 40 percent contract. (The overlap is because some jobs are listed as “either or both” full time and contract.)
So far this year, this Dice ratio hasn’t changed. But Silver predicts it will. In a recessionary environment, employers lean toward contract hires, fearing the risk of bringing on full time staff. “That’s what we saw back in 2002,” he says.
“I would expect to see, probably over the next 6-12 months or so, an increase in the number of contractor positions.”
Companies assess which major projects can’t be postponed and hire a crew of contractors accordingly. When the project is done the IT pros typically get a ‘thank you’ and are sent home, though there's always a possibility the assignment turns into full time.
Amid the gathering gloom, a few bright spots still exist. Surprisingly, some smaller markets continue to see increases in job openings.
Silver says that while major markets like Silicon Valley, New York and Washington DC, which have thousands of jobs, are down heavily, secondary markets, cities with around 1,000 jobs, are up, if modestly. And sometimes not so modestly. Cleveland and Cincinnati “are up by over 20 percent,” he says. If you’re willing to relocate, the openings are still out there.
Similarly, certain sectors continue to look okay. Specifically, the virtualization job market. “Granted, it’s still small,” Silver says. Yet virtualization will continue to grow as companies seek to improve their efficiency. CIOs looking for payback in a 12-24 month project are willing to consider virtualization even in a belt-tightening period.
Silver also notes that some of the most commonly hired positions – he points to Java Programmer and Database Administrator – are retaining their value in the marketplace. "They are declining but they are still among the most popular.”
Annual Tech Sector Job Cut Announcements, 2001-2007
Challenger, Gray & Christmas figures (rounded off):
2008: (through Oct. 31): 140,000