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Tech: Where are the jobs?
This was a super year for tech stocks but that probably won't translate into much job growth in '04.
December 15, 2003: 5:39 PM EST
By Paul R. La Monica, CNN/Money Senior Writer

NEW YORK (CNN/Money) - Was 2003 a strong year for the tech industry? It depends whom you ask. For tech investors, it was a very good year, with the Nasdaq up 46 percent.

But if you're a tech worker, times still aren't so great. According to a recent survey by tech trade group AeA, approximately 234,000 high tech jobs were lost in 2003, building on the loss of 540,000 jobs in 2002.

Although it appears that the bear market for tech stocks has finally come to an end and corporate tech spending is set to increase, industry observers say that there probably won't be major improvement on the job front in 2004.

Mark Zandi, chief economist for Economy.com, said the best the industry could hope for would be some job growth after two years of losses.

There are a few reasons.

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Of course, the trend toward outsourcing continues to accelerate. The latest example was a report Monday that IBM (IBM: Research, Estimates) was planning to ship more than 4,700 programming jobs overseas by early next year. "I don't see any reason why tech outsourcing will come to an end since businesses can reap enormous cost savings," said Zandi.

And tech companies have come to enjoy the higher profit margins that come with a lean work force. Job cuts made during the past few years helped boost results this year as more revenue flowed to the bottomline due to lower labor costs.

Finally, many tech companies are still faced with relatively tough budget choices and hiring workers is often the last priority, according to Arnie Berman, chief technology strategist for Soundview Technology Group.

 

He said that firms have been increasing their capital spending, buying new hardware and software, instead of spending more on operating expenses, such as payroll.

"The first focus for companies is reducing operating costs, squeezing the most out of your employees and restraining headcount," said Berman.

Security, wireless and chips may step up hiring

Still, there may be some pockets of strength in the tech labor market, said John Challenger, chief executive of outplacement firm Challenger, Gray & Christmas. In particular, Challenger said that increasing demand for security solutions and wireless applications should lead to some new jobs in these areas.

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Challenger added that smaller tech companies are probably more likely to be hiring than increasingly cost-conscious tech giants. "Smaller to medium sized companies will be looking to beef up and build tech infrastructure just as big companies did in the last boom," he said.

Berman also noted that the semiconductor and chip equipment sectors could start hiring again since orders have picked up dramatically in recent months.

But there will probably be continued job cuts in the telecom sector next year, particularly telecom services, as this group remains in a major slump. In the past few weeks, long distance providers Sprint (FON: Research, Estimates) and AT&T (T: Research, Estimates) and local phone giant SBC Communications (SBC: Research, Estimates) have all announced more layoffs.  Top of page




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