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Ed Frauenheim


Job trimming at technology companies took off during the past three months, according to a new report.

Announced job cuts in the technology sector hit 54,701 in the third quarter, up 60 percent from the second quarter and 14 percent from the third quarter of 2003, according to a report Monday from employment services firm Challenger, Gray & Christmas. Challenger defines the technology sector as computer, electronics, telecommunications and e-commerce companies.

John Challenger, CEO of Challenger, Gray & Christmas, blamed the cuts on pricing problems in the sector. “High-tech job cuts are on the way up as the end of the year approaches. Behind this trend is the fact that technology companies have virtually no pricing power,” Challenger said in a statement. “Even as demand increases, most manufacturers and service providers are getting less money for each unit sold. They are forced to cut costs to maintain healthy profit margins.”

The report adds to the mixed signals that have emerged about the information technology job market. Technology services companies like IBM and BearingPoint are hiring in the United States, though they are increasingly looking for employees who can combine technology chops with business savvy. Payroll employment in computer systems design and related services hit 1.14 million in September, up 32,700 since September 2003, according to the U.S. Department of Labor. And research firm Meta Group recently predicted salaries of IT staff will increase by as much as 15 percent over the next three years.

On the other hand, tech workers face the threat of “offshoring”–when tasks such as programming get sent to low-wage nations. A recent study from the Information Technology Association of America found that hiring managers have less ambitious plans for filling IT posts this year compared with last year. What’s more, a measurement of IT workers’ confidence in the job market dipped in September.

So far this year, high-tech companies have announced 118,427 job cuts, which account for 16 percent of the 724,320 announced job cuts in all industries through Sept. 30, according to the Challenger report. The percentage of high-tech cuts has increased since the second quarter, when they represented 13.5 percent of all job cuts, Challenger said.

Challenger’s statistics refer to announcements by U.S. companies about work force reductions, and can include layoffs, jobs lost through attrition and early retirements. The numbers can include job cuts that U.S. companies make in units outside the United States.

According to the report, about 56 percent of the third-quarter job cuts, 30,624 positions, came from computer companies–manufacturers and distributors of computer hardware, software, parts and peripherals, plus computer service companies.

“There are certain areas in the technology sector that are thriving. Demand is high for those who specialize in network and IT security. Tech support is another area looking for people. However, it could be some time before overall technology job creation returns to the pace we saw in the late 1990s,” Challenger said. “That may happen only when baby boomers begin leaving the work force en masse due to retirement. At that point, many industries, including technology, could be struggling to find skilled workers.”