IT unemployment has reached unprecedented levels as companies facing tough economic times let go of skilled professionals who were highly sought after just a few years ago.
In October, unemployment remained at 5% of the IT workforce, matching the September rate, the highest unemployment rate for those months since the last recession, when it reached a decades-old high of 4.3% in September 1991, according to U.S. Bureau of Labor Statistics figures released Wednesday. A year ago, IT unemployment stood at 1.7% in September and 2.6% in October.
Several economists see a connection between higher IT unemployment and lower IT spending. As companies invested heavily in IT from 1995 through mid-2000, they hired IT professionals to wire, install, and program the machinery and software. "In the third quarter of 2000, after Y2K, businesses began to re-evaluate their technology positions and pulled back on IT purchases and investments, resulting in a significant pullback on hiring and job losses," says Ernest Goss, an economics professor at Creighton University in Omaha, Neb. Though many of these job cuts were made by IT vendors, Goss notes that job losses also began to filter down to consulting and user companies.
One theory advanced by the economists to explain the sharp increase in IT unemployment is that IT work is more intensive at and near the times technology is purchased, and fewer IT pros are needed later after the technology is deployed. "There's a lot of efforts to network IT purchases together, but once the equipment is in place, there's no increased need for IT workers related to those investments," says Scott Brown, chief economist for the stock brokerage firm Raymond James & Associates in St. Petersburg, Fla.
The IT unemployment rate comes from statistics gathered from household surveys each month by the Bureau of Labor Statistics at the request of InformationWeek, and reflect three categories of IT related occupations: computer systems analysts and scientists, computer programmers, and computer operators.
The September IT unemployment rate of 5% exceeded the overall jobless rate by 0.3 percentage point--the first time that has happened since the bureau began tracking IT unemployment in 1963. Last month, the IT unemployment rate stood 0.4 percentage point lower than the overall rate of 5.4%. By comparison, annualized IT unemployment rates since 1963 has averaged 4 percentage points lower than that of the overall workforce.
|Unemployment rate for IT workers
October 1989 to 2001
|Data: Bureau of Labor Statistics|
Why does IT unemployment rate now mirror the overall jobless figures? Unlike the last recession of the early 1990s, when middle managers took the brunt of corporate layoffs, this time around companies are laying off employees across all job classifications. "You got a lean structure to begin with many of these firms so cuts are made across the board," Brown says. In addition, he says, after spending years trying to hire hard-to-find IT talent, many companies were reluctant to let them go. "When the economic slowdown began, managers thought it would be short term, hoping the economy would snap back," Brown says. "There was a little bit of hording of skilled labor then. But over time, as things didn't improve, they had to cut cost anywhere they could."
Moreover, as John Godfrey points out, many recent IT job losses have occurred at companies that have declared bankruptcy and/or have shut down. "When you close up shop, everyone goes," says the principal and chief economist for the Jacksonville, Fla., consulting group Florida Economic Associates.
An analysis of bureau statistics reveal:
- The IT labor force last month approached record levels of 2.94 million workers, with 147,000 of them out of work and looking for jobs.
- Between 1963 and 2000, the annualized IT unemployment rate peaked at 3% in 1991 and 1992, the years of the last recession, and bottomed out at 1.3% in 1997, the start of the dot-com craze.
- The IT workforce of 2.94 million represents a mere 2% of the nation's overall civilian labor force of 142.30 million people in October.