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7/14/2006
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In Depth: U.S. IT Unemployment Plunges To 2.2%. But There's More To This Story

IT employment hits an all-time high. But there's more going on than meets the eye.

Tech employment in the United States has been rising, to a record 3.48 million people in June, as 185,000 jobs were added to the rolls over the past two years. Despite fears that IT is becoming a dead-end profession as work moves offshore, IT jobs were added at a faster rate during the past 24 months than in some perennially hot fields like accounting, nursing, and legal, according to the most recent data from the U.S. Bureau of Labor Statistics.

But there's more to the numbers than meets the eye. The IT profession is growing faster than other occupations in part because it fell harder during the recession that followed the dot-com bust. In mid-2004, IT unemployment stood at 5.3%, after the industry shed 160,000 jobs in just three years. The IT unemployment rate last month was 2.2%, the lowest it has been since the beginning of the decade, according to InformationWeek's analysis of the Bureau of Labor Statistics data. Yet other professions still have lower unemployment: 1.8% for accountants, 0.7% for lawyers, and 1.1% for registered nurses.

From mid-2004 to June of this year, the number of IT jobs grew 5.6%, far outpacing other professions. The number of employed accountants grew 3%, attorneys 0.4%, and registered nurses fell 1.4%. The number of managers across all professions rose 3.4%.

The IT gains don't surprise Scott Brown, who tracks employment trends as chief economist for financial brokerage Raymond James & Associates: U.S. employers with their eye on the bottom line are hiring more IT pros. "There's still a very strong emphasis on productivity growth, and that's how you get there--with technology," Brown says.

The fastest growth in IT employment is among computer and IS managers, up nearly 15% the past 12 months. Other growing job categories include software engineers, up 3.6% to 853,000, and systems analysts, up 2.2% to 756,000.

Got Work? line graphWhere The Growth Is
Don't think of IT managers solely as CIOs, VPs, directors, and other highfalutin titles. Think program and project managers. Managers' ranks are swelling--390,000 are employed as managers today, compared with 271,000 in 2001, as people who once were programmers take on managing outsourcers or work in small teams that include IT and business-unit peers. Dice, an online high-tech employment service, has some 14,000 job openings for project managers posted, up 43% from this time last year. Dion DeLoof, president of IT staffing firm Anteo Group, knows many developers who spend less time creating and more time supervising and managing. "They're being asked to do a lot more," he says.

The ramp-up in management positions reflects an evolution of the IT workforce. As IT becomes ingrained in every aspect of an enterprise, more people are needed to manage the flow and integration of information, especially at companies that outsource. "As outsourcing relationships continue to evolve, the junior people or nonmanagement people are gobbled up by sourcing relationships or farmed out to other parts of the organization, or they're dismissed," says Scott Holland, a research director at the Hackett Group, an advisory firm. "You don't find too many computer operations jobs anymore. It's more about the folks who are business technologists, people who can obviously code but also have a stronger sense of the business."

The past 12 months have even seen a halt in the slide of programmer jobs, with a 1% increase to 564,000. But programmer employment still is down 24% from 2001.

U.S. employers are seeking more full-time IT pros than a few years ago. Two-thirds of personnel requests on Dice are for full-time positions and one-third are for contractors, the reverse of a few years ago. As the economy began to rebound from recession in 2002 and 2003, companies hired consultants because they didn't want to commit to full-time employees, but they still needed to tackle IT projects delayed by the economic slowdown. Now, feeling more confident, companies are hiring.

That's what's happening at Freddie Mac. Adding full-timers and using fewer contractors will let the mortgage finance company keep in-house the industry knowledge that people gain working on projects, says Noreen Iles, a VP of IT who's leading a new office in Chicago that the Virginia-based company opened late last year. Hiring staff also will let Freddie Mac add skills, as it moves from an IT environment dependent on custom software to a buy-and-integrate strategy using packaged apps. Iles has a tough job in a tight job market: She plans to take the Chicago office from 42 people now to 150 by year's end.

Though the U.S. IT job market is still grow- ing, there are signs it's slowing. From mid-2004 to mid-2005, IT employment grew by 129,000. That slowed to a 57,000 job gain from mid-2005 to June of this year.

Living With Outsourcing
Despite low unemployment, salaries, while rising, show no signs of shooting up. InformationWeek's National Salary Survey of more than 10,000 IT pros this spring found that average pay for staffers grew 3%, to $73,000, and 4% for managers, to $99,000. But nearly all of those increases were tied to bonuses; base salaries remain nearly flat.

Global IT labor competition may be one reason, though two reports last week suggest outsourcing is slowing. TPI, a company that tracks outsourcing deals, reports that fewer deals valued at $50 million or more were awarded in the second quarter than in the first, and that smaller, shorter deals mean this year likely won't match last in total outsourcing spending. Likewise, DiamondCluster concluded that the IT outsourcing boom is over, as customers have captured the "low-hanging fruit" and are hesitant to go further. Yet someone's spending on outsourcing: Indian IT services vendor Infosys Technologies last week reported a 39% increase in quarterly sales and a 43% increase in net income.

Recent IT employment growth suggests the U.S. job market is learning to live with outsourcing and offshoring. Now the industry must get to work convincing people that IT jobs are here to stay.

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