US tech job growth lags behind the private sector

Robots, outsourcing and contraction prove worrisome

Prepare for a tech sector rebound

Let’s start with the good news: The economy has added private sector jobs for 55 straight months. During this span, 10.3 million private sector jobs have been created.

And the bad news? Job growth in the US technology industry lags behind the overall private sector.

Unfortunately, this isn’t too new. According to a 2013 TechAmerica Foundation report, the number of technology-related jobs in the US grew by less than half the rate of overall private sector job growth in the first half of 2013.

Recently, similar results surfaced for 2014. During the first six months of 2014, tech employment increased a measly 1.9% - roughly the same percentage during the first half of 2013. The overall private sector witnessed nearly double employment growth of 3.5% during the first six months of 2014.

As TechRadar Pro reported last month, despite the slight growth, US tech companies are making employment cuts. Microsoft is expected to cut 18,000 jobs, including company testers and engineers by early 2015. HP has cut more than 50,000 jobs in the past few years. Dell cut 15,000 jobs earlier this year in an effort to rebound its PC business. Cisco cut almost 10% of its global workforce after posting a 3% fiscal 2014 revenue decrease.

And these are just the tech giants.

The rise of the robot

Not surprisingly, IT companies are turning to tech to save money without sacrificing workplace productivity. The result? 2014 could be remembered as the year of the robot, as jobs are cut in favor of automation. The jobs most likely to be automated include IT help desk workers, programmers and engineers.

Outsourcing abroad

Outsourcing jobs offshore has been a reality for many sectors for many years. However, the phenomenon that used to be an option of IT companies is quickly becoming a reality. Although companies chose to outsource to Asian destinations, software development and security needs grew, along with a preference for geographically closer partners. As more IT jobs become outsourced abroad, companies need closer, more advanced locations. Enter Europe.

The American trend of outsourcing IT to Eastern Europe has been on the rise not only as a cost-saver but also because of highly skilled labor available in this region. Relative geographical and cultural proximity also have proven attractive for many US tech companies.

According to a 2009 McKinsey report, Eastern European countries are more expensive, but they also provide strong specialist talent, the requisite language skills, and excellent infrastructures. These factors may often compensate for the higher cost for many IT companies and ultimately prove most cost efficient.

Although outsourcing abroad will likely continue to be a popular trend for US tech companies, backsourcing may be a future trend according to KPMG Advisory. The research firm expects 20% to 30% of IT services historically outsourced to be brought back in-house.