IT Services Succumb to Recession

Payrolls among IT services firms experienced their biggest one month decline in more than five years but employment levels at these companies remained higher than they were a year ago.

According to the employment report issued Friday by the Bureau of Labor Statistics, payrolls at so-called computer systems design and related services firms fell by 2,900 to 1,428,500 in December. It’s the biggest drop since August 2003, when payrolls at IT services firms fell by 3,400. It was only the second decline in IT services payrolls since May 2005; this past March, the sector saw payrolls dip by 2,200 workers.

The loss of employment in the IT services sector shouldn’t be surprising considering the battering the economy is taking. Yet, IT services firms are performing much better than the rest of the economy. In 2008, employment among IT firms grew by 2.7% or 37,100. As a comparison, overall nonfarm employment plunged by 524,000 in December and nearly 2.6 million for all of 2008, a 1.9% drop.

As the recession continues, expect to see payrolls at IT services firms to continue to contract, but only modestly. Businesses rely on IT to function, and in an economic turndown, companies more likely will turn to IT services firms to keep their operations running before they hire full-timers to take over.

Photo: AP