JobStats - August 2002 - bumping along the bottom (really this time I hope): 09 Aug 2002
09 Aug 2002
A review of the year so far
2001 was a very bad year for the IT job market and 2002 shows no signs of
being much better. The slump in adverts has continued, not at last year's
catastrophic rate but steadily with each month lower than the last. There are
now fewer jobs advertised than at any time since JobStats started collecting
the figures nearly three years ago.
The spectacular growth we saw in 2000 was caused by several factors: projects
starting that had been delayed because of Y2K fears, the stock market boom
making it easier for firms to raise cash for projects and most importantly
the dot-com boom. This led to a near doubling of demand for IT staff. When reality struck
and it became clear that most of the dot-com firms would never make the money
people were hoping for (or any money at all in some cases) the demand
for IT staff started to fall. The uncertainty following September 11th accellerated the fall.
What to expect in the next half year
There are none of the factors I mentioned above to lift the
market. On the contrary, a recent report by Goldman Sachs on IT spending in
the US shows that over half the respondends expect to underspend their budgets
and only a quarter expect normal IT spending growth to resume next year.
In light of all this I don't think we're going to see any marked improvement. So are
things going to get worse? With the summer holidays on us the demand will be
depressed simply because decision makers are enjoying their two weeks of sun.
This summer effect has been masked for the past two years firstly by dramatic
growth and then by an equally dramatic fall but now it could be hiding a
levelling off in the current decline. There are no reasons I can think of for
any further falls in demand right now. But if the USA invades Iraq next year
you can expect higher oil prices and that would depress the general economy.
Contracting outlook
Within this general decline there are some brighter points though. Rates have
generally held up. Contract rates are down from the peak 18 months ago and
are still declining but permanent salaries are rising or holding steady. This
means that the premium for contractors is shrinking. The cash rewards for
contracting have been around twice those for permanent positions they are now
about 50 percent more. Going contracting used to be a 'no-brainer', it's not so
obvious any more. At the same time though the proportion of contract jobs has
gone back up to a quarter of all jobs having fallen to under a fifth six
months ago (at the peak nearly a third of all adverts were for contracts).
Are contract rates going to go up anytime soon. I wouldn't bet any money on that
happening for the next 12 months at least. As I say above I don't think that the
demand is going to go up much anytime soon. On the supply side there is a large
number of contractors looking for work.
A couple of recent surveys of IT contractors have both painted a very bleak
picture of the current employment status. NamesFacesPlaces
(a contractor reunion site) quotes 50 percent of contractors as being 'between contracts'
and ContractorUK quotes 28
percent. Both give a figure of 10 percent of contractors who don't expect to be
renewed.
Skills shortages and fast-track visas
When I first left home I faced a skills shortage. I needed a live-in housekeeper
who would make my bed, do my washing and cook my meals for me. The trouble was that I
couldn't afford to pay anyone to do this for me. Where's the problem you ask? There
are millions of people in the world who would have been willing to do this at
a price I could have afforded even as a student. The reason (of course) was that I
was not allowed to undercut the pay of domestic servants in the UK by employing
foreign staff.
The same issues arise when you look
at the skills shortages in the IT sector. The skills shortage is really a money
shortage. I can find just about any skill you care to name if I can
pay enough. At some point the economic return on employing the person doesn't
cover the cost and the shortage disappears. Instead of allowing the pay of IT
staff to rise the government has chosen to allow people in from overseas. This
might conceivably have been justified in 2000 but to continue with this in the
current market conditions is madness. If the government wants to manipulate the
market it needs to be much more swift in its reactions.
According to ContractorUK
the fast-track visa scheme has issued 20,000 visas in the past two years.
The fast-track visa scheme
is now just displacing UK nationals, this was not the intention of the policy;
it should be dropped or at least all IT skills should be removed from the list
of applicable skills.
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