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4/4/2005
12:30 PM
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IT Employment On Upswing

The unemployment rate among business technologists plummets nearly 2 points in one year, an InformationWeek analysis of government data shows.

IT joblessness is falling at a faster pace than overall unemployment.

Unemployment among IT workers stood at an annualized rate of 3.7% for the four quarters ended March 31, according to an InformationWeek analysis of U.S. Bureau of Labor Statistics data issued late last week. A year earlier, IT unemployment hit a post-boom high of 5.5%. Last quarter's IT unemployment rate reached its lowest point since the final quarter of 2001, when it was 3.7%, too.

The number of Americans employed in IT approached 3.38 million in the first quarter. IT employment levels haven't been this high in about three years. Employment last quarter among IT professionals increased by about 39,000 from the end of the previous quarter and about 57,000 from a year earlier. That's still about 82,000 fewer jobs than at the end of the second quarter of 2002, when the analysis of bureau data pegged IT employment at nearly 3.46 million. The second quarter of 2002 marked the apogee of IT employment since the Bureau of Labor Statistics adopted a new way to calculate employment and unemployment data in 2000.

The number of unemployed Americans looking for IT jobs last quarter fell to 131,000 from 149,000 from the previous quarter. That's a marked improvement from the first quarter of 2004, when some 192,000 American IT professionals found themselves unemployed.

Unlike the overall unemployment rate broadly reported the first Friday of each month, which is seasonally adjusted, unemployment for specific job categories are unadjusted. To put these figures in perspective, overall unemployment last month fell to a seasonally adjusted 5.2%; unadjusted it was 5.4%. A year earlier, the overall unadjusted jobless rate stood at 6%, about 0.5 of a point higher than the IT rate. Last month, the gap between overall and IT unemployment widened to about 1.7 points.

Historically, IT unemployment had been considerably lower than overall joblessness. Businesses need IT pros to exploit corporate technology investments to help boost productivity, revenue, and profits. In the mid- to late 1990s, propelled by year 2000 code remediation and investments in enterprise and Internet technologies, IT unemployment hovered between 2 and 3.4 percentage points lower than overall unemployment.

Scott Brown, chief economist of securities broker Raymond James & Associates, doesn't expect such a large chasm to return, but he believes IT employment will outdo the rest of the jobs in the near future as businesses hire IT professionals to develop and deploy applications from new technology they've been acquiring. Also, he says, an increase in corporate acquisitions requires additional IT talent to link together disparate information systems of the merged companies.

The two IT job categories to see the biggest percentage of year-to-year employment growth are database administrators and network and computer systems administrators, increasing at an annualized rate of 28% and 19%, respectively. The biggest drops came from network-systems and data-communications analysts, down 7%, and computer programmers, off 4% for the year. Because of the relatively small sampling size for each job category, changes from earlier periods tend to be highly volatile.

The size of the IT workforce--those employed and seeking work in IT--rose last quarter by 22,000 to an annualized level of 3.51 million at the end of the first quarter, a 1.2% increase from the previous quarter. Still, fewer Americans consider themselves IT pros than they did in the not-too-distant past. A year earlier, at the end of the first quarter of 2004, the IT labor force had 4,000 more workers than it did last quarter. The IT workforce last quarter had about 69,000 fewer pros than it did at its post-2000 peak in the third quarter of 2001.

But the trend is toward a growing IT labor force as the career regains some of the luster it lost with the collapse of the Internet bubble. Between mid-2002 and late 2004, more than 100,000 Americans dropped out of the IT labor force, bottoming out at about 3.47 million in the final quarter of 2003. Academics reported a decline in enrollment in college information management and computer-science programs as the dot-com bust discouraged students about IT careers. In addition, many employed as business technologists with startups in the late 1990s and early 2000s found themselves out of work with the collapse and sought careers in other fields. When someone seeks a job outside of IT, Labor Statistics economists remove that person from the IT workforce.

Each month, the government surveys 60,000 households to determine employment levels. The sample size is big enough to give economists confidence in the overall unemployment rate. But the data becomes less reliable as the sample size shrinks for each job category. For instance, IT employees and managers represent only about 2.5% of the total American workforce. That would equate to about 1,500 households for all IT professionals. The IT category used for our analysis represents eight job groupings--computer and information systems managers, computer scientists and systems analysts, computer programmers, computer software engineers, computer-support specialists, database administrators, network and computer systems administrators, and network-systems and data-communications analysts. That means the sample size for each grouping would be even smaller.

To compensate for the smaller sample size, InformationWeek aggregates four quarters worth of data, creating an annualized rate, to determine the latest quarter's employment numbers. So the most recent figure reflects a year's worth of quarterly data through March 31. Doing that quadruples the sample size for each job category, increasing the reliability of the data, according to economists. That would be like sampling 6,000 rather than 1,500 households.

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