Economic indicators, both for IT and for the broader economy, seem to be all over the board. Whether you look at the rising stock market versus the falling median income in the U.S., or the rising IT manager hiring versus decreasing employment rate in that same category, the numbers are nothing if not confusing. Can these seemingly conflicting numbers be resolved into a clearer picture of where things are headed?
Pundits seemed far too quick to pronounce the economy to be in recovery mode following the so-called Great Recession. In the interim a batch of confusing economic numbers have cropped up: For instance, the official unemployment rate, which bottomed around 4.5% just before the recession and spiked to around 10%, has fallen steadily to nearly 7.5%.
On the other hand, the labor force participation rate (the percentage of working-age individuals who actually have jobs) has fallen steadily since the recession from around 66% to well under 64%, according to the Bureau of Labor Statistics. The Huffington Post reports that “the number of Americans in the labor force—those who have a job or are looking for one—fell by nearly half a million people from February to March.” An Investors.com infographic notes that if workers who have dropped out of the labor force are included, the most recent unemployment rate would be near 11.1% and rising.
In addition, who can miss the stock market reaching all-time highs regularly over recent weeks? On the other hand, the median household income (inflation adjusted) has been on an overall downward trend—and not just since the recession. (But the actual median income has been rising.) Where’s big data analytics when you need it?
The overall economy has an impact on sectors like IT, but what are we to make of all the disparate trends? And what of the fact that the current annual government spending (federal, state and local) of about $57,000 per household (assuming roughly $6.6 trillion in spending and 115 million U.S. households) exceeds median household income (about $51,000)? Despite whining about sequestration, the federal government is projecting tax revenue of “a record $2.712 trillion…on Americans and U.S. business this year, shattering the 2007 high of $2.5 trillion,” according to The Examiner.
Of course, statistics can always be manipulated, and some of this data may need a better context. But the lack of an overarching trend to unify the individual trends complicates analysis of specific markets, like IT.
According to government data, the unemployment rate for IT managers has been rising since 2011 (2.9%), reaching 3.5% for 1Q13—but over the same period, the number of employed IT managers rose from 553,000 to 638,000, according to Network World. Similarly, Computerworld notes that although the unemployment rate for software engineers has fallen year over year to 2.2%, the rate for electrical engineers has risen sharply to 6.5%.
As with the overall unemployment rate, these numbers depend greatly on who counts as unemployed (versus, say, underemployed or simply not looking for work). Furthermore, in looking at a specific area, like IT management, the types of jobs individuals are trying to find affects the numbers. For instance, as Network World notes, “some IT professionals who took different types of jobs during the downturn, may now be trying to return to management positions.”
In the case of electrical versus software engineering, the numbers may have more to do with the dynamics of the technology sector than with broader economic conditions. In the silicon market, efforts to build more-powerful processors (for instance) are becoming increasingly difficult as process technologies approach the limits of semiconductor capabilities. As the strategy of technology improvement through better hardware becomes more expensive, the focus shifts toward more-efficient use of existing hardware through software improvements. Tapping into the potential of existing technologies also requires software. So, the rising demand for software engineers, but falling demand for electrical engineers, may simply a signal a shift of industry focus from making new gadgets to actually using or improving the efficiency of those gadgets.
Effects of Broader Economic Conditions
According to Robert Half, 75% of CIOs plan to hire IT staff in 2Q13. Although that outlook sounds great, only 14% of CIOs plan to add staff, whereas 61% only plan to fill existing vacancies. In that light, although the data is positive, it is less encouraging than it might appear. Nevertheless, the Robert Half study indicated that “eighty-nine percent of CIOs reported being somewhat or very confident in their companies’ prospects for growth in the second quarter of 2013.” When contrasted with the hiring plans, this sample of CIOs seems to suggest that although the majority of these companies are expecting growth, that growth fails to warrant an expansion of IT staff in most cases. This trend may be the result of increasing reliance on IT automation or simply an expectation of more effort from existing employees. Increasing employment costs, particularly due to Obamacare, may also bear some blame.
In some ways, the IT picture reflects that of the broader economy. Companies seem to have a semi-optimistic outlook—albeit with some degree of wariness—but not one that works itself out through staff expansions. Perhaps the best description of both IT and the economy as a whole is hopeful but uncertain. Conditions in Europe—record unemployment (Greece), financial insolvency (Cyprus), debt concerns and questions about the future of the euro—could well be harbingers of similar problems in the U.S. But depending on which numbers one considers, the situation can appear to be improving or worsening. This year may simply be a holding pattern, pending some development that drives the economy either toward an unambiguous recovery or an undeniable recession.
The IT picture is uncertain. The technology sector as a whole is stronger than many other markets, but it isn’t immune from the effects of the broader economy. Employment seems to be a mixed bag, with hiring in the works, but not much in the way of new job creation. The relative unemployment rates of software and electrical engineers may, apart from any overall economic considerations, simply be signaling a shift of focus in the industry. In any case, interpreting the numbers is a challenge: from deciding who should be considered unemployed to determining what type of position individuals are pursuing, the data can apparently be massaged to fit the message. Is overall unemployment falling, reaching nearly 7.5%? Or is it rising, with the true value much closer to 11%? Is hiring in the IT sector set for a robust quarter, or is it really just a ho-hum filling of existing vacancies?
Whatever picture you want to paint, you can probably find numbers to support your position. Unfortunately, the uncertainty may remain for years (as in a Japan-style “lost decade”); developments that drive the economy (and particularly IT) in one direction or the other may be slow in their effects—or they may arise suddenly, as with the bursting of the housing bubble, which triggered the recession. Prognostication in this area is difficult, especially considering the lack of distinct trends.
Photo courtesy of jay