IT Services Job Growth Slowdown in September Just a Blip

The IT services industry posted its smallest monthly job growth since May 2010. However, given a variety of non-IT services specific factors involved in the weaker September numbers, the slow but steady progress on the IT services jobs front is a better story.

The IT services industry posted its smallest monthly job growth since May 2010, according to an analysis of the U.S. Bureau of Labor Statistics' (BLS) monthly employment report. The industry added just 1,100 IT services jobs in September, compared to the 19,300 added in August and 11,500 the same time last year.

And in what David Foote, CEO at IT research firm Foote Partners which analyzes the BLS reports, calls a "stunning, sudden reversal in IT job expansion," the numbers revealed a net loss of 1,700 job segments associated with IT professionals -- the first decline in more than two years not associated with a labor strike or other temporary market anomaly.

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Many of the IT jobs in the report, particularly those in IT services, have been on strong and sustained growth runs for nearly two years, said Foote, and there was no structural shift that could account for the slowdown in job creation.

"If it were structural you would see it playing out slowly over many months, not in one sudden market burp," says Foote. "The fact is that companies are actively searching for talent and hiring for the future, though with considerable selectivity."

Indeed, 252,000 IT services jobs have been added in the last two years, according to Foote's analysis. IT job expansion was particularly strong in the late summer when the BLS reported the greatest monthly jobs gains in IT-related roles in five years.

There may be a couple of non-IT services specific factors involved in the weaker September numbers, says Foote, including nervousness leading up the U.S. presidential election and end of fiscal year frugality for those companies who operate on a calendar year.

"It's perfectly normal for them to step back in September and recheck their budgets and hiring plans for the rest of the year and the beginning of the next fiscal year," Foote says.

"The market has been generally volatile for a while, so [the BLS numbers] are not a major surprise," says Phil Fersht, founder of outsourcing analyst firm HfS Research. "I wouldn't read too much into it, unless there is a similar outcome next month." (Foote predicts the October and November BLS employment figures will reveal a return to robust IT services hiring.)

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The dramatic one-month drop aside, however, there has been "a gradual slowdown in North American IT services activity over the past year, which can be reflected in the slower growth numbers from most of the key providers," adds Fersht. "Essentially, the market is maturing and over-saturated, and companies are figuring out how to get things done without continually adding new staff."

Despite the strong hiring in IT services reflected in the BLS numbers over past few years, says Foote, "I'm seeing a corner turning with CIOs now about in-house versus outsourced skills and talent acquisition. They outsource to reduce costs and be agile, but aggressively insource to innovate and invent. That's driving hiring strategies, major organizational changes, and serious reviews of compensation and recruiting practices."

Stephanie Overby is regular contributor to CIO.com's IT Outsourcing section.

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