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

Recession Be Damned! IT Services Jobs Rise

American businesses cut 533,000 payroll jobs in November, the biggest monthly job loss in over 30 years as nearly every sector eliminated jobs. But one sector bucking this trend—computer systems design and related services firms, commonly known as IT services—increased payrolls last month.

In November, an analysis of U.S. Bureau of Labor Statistics data by The IT Job Analyst blog shows, IT services firms added 2,700 jobs. IT services firms employed in November some 1,435,900 people, a record high. Since November 2007, employment at IT services firms rose by 48,400, or 3.5%. As a comparison, all American employers shed 1,870,000 or nearly 1.4% from their payrolls in the past year.

In past recessions, IT services firms suffered along with the rest of the economy as business leaders didn’t highly value information technology. From March 2001 through August 2003, IT services firms payrolls shrank by 18.4% or 248,300 jobs.

Why is this recession different? Companies can’t function without IT. Today, IT know-how and the efficiencies technology brings business are among the last thing companies forfeit in troubled economic times.

Here’s what Jerry Luftman, a Stevens Institute of Technology IT professor who surveys CIOs for the Society for Information Management, told me earlier this week (read a fuller version of Luftman’s observation at our previous blog posting):

“This economic downturn is very, very different from previous ones. Today, companies are going to IT and asking them for ideas as to how IT can be leveraged to reduce the costs of other parts of business.”

But the recession is having a mildly negative impact on IT services employment. Payroll growth is slowing. A year ago, IT services payrolls rose by 5.8% or 76,300 jobs. Since January 2005, IT payrolls have consistently risen each month, except for one, this past March. Few other sectors can make that claim.

The computer systems design payroll numbers reflect the relative strength of IT employment when compared with the rest of the economy. The national unemployment rate jumped 2 points to 5.7% in November, a 15-year high. The government doesn’t furnish a separate IT jobless rate. It does release specific occupation figures on a quarterly basis, however. And, my analysis of those numbers from the third quarter shows IT unemployment hovering near record lows. In the third quarter, IT joblessness rose one-tenth of a point to 2.4%, with 4,010,000 Americans employed in the profession, a record high.

When the current quarter's employment figures become available next month, don't expect IT unemployment to remain so low. IT professionals aren't immune from this recession. But it would be surprising if IT joblessness came anywhere near the levels of overall unemployment. If it does, our nation would be in even worse shape than it is today.