Return of the Guru

Unemployment Numbers Especially Troubling for IT

Ara Trembly
Insurance Experts' Forum, December 6, 2010

Just when you thought it might be safe to talk about a sustained economic recovery, the labor news in November threw ice-cold water on smoldering hopes. According to The New York Times, after several months of improvement, hiring by businesses slowed to a crawl last month. The unemployment rate rose to 9.8% in November, the highest jobless rate since April and up from 9.6% in October.

This news is especially discouraging for IT as well as insurance, with rumors swirling about anticipated cutbacks by carriers, particularly among health insurers who must find a way to pay for what most believe will be increased costs under the new federal healthcare legislation.

TechServe Alliance, an IT industry group based in Alexandria, Va., said that its analysis of the U.S. Department of Labor report released on Friday found that IT employment increased by only 600 jobs in November on a base of 3.9 million jobs, said a posting in Computerworld. That same posting hinted that at least some of the problem for the IT sector, which performed worse than the economy overall in terms of jobs added, might be due to outsourcing of IT jobs and functionality.

Can there be any doubt that this is so? Hiring—as a corporate activity—is generally a response to optimism about one’s own company, as well as the economy in general. While we may have had a few months of hopeful trends, the Times asserts, “The outlook remains bleak. More than 15 million people are out of work, among them 6.3 million who have been jobless for six months or longer. Many are about to exhaust their unemployment benefits, which have been extended repeatedly by the government because of the severity of the downturn.” 

Further, companies (including some insurers) have grown comfortable with outsourcing functionality—even critical functionality—to third parties, many of which are foreign-based. Thus, it seems even less likely that we will see rehiring of displaced U.S. IT workers when conditions really do improve. This is the expected fallout from our shameful treatment of U.S. IT employees, but that doesn’t make it any easier to swallow.

The Times adds that private companies added 50,000 jobs in November. Most of those increases, however, came in the temporary help and health care sectors. “One sign of continued insecurity among employers was that temporary workers accounted for 40,000 of the jobs added in the private sector. Staffing firms said companies were continuing to use contract workers to fill gaps rather than binding themselves to permanent employees,” the newspaper notes.

Herein lies the proof that employer confidence—the key factor in generating jobs—remains weak, and the fact that IT departments have already found what many deem to be suitable alternatives means that confidence in U.S.-bred IT workers is perhaps even weaker.

Yet, I know from personal and professional experience that our homegrown IT folks are among the most knowledgeable and hard-working employees one could hope to have. The fervent hope here is that insurers and other IT employers will remember this fact when funds become available for new hires. Outsourcing may have served a purpose in helping many companies to tread water, but when the race begins again, let’s get our U.S. stars in the lineup.

Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.

Readers are encouraged to respond to Ara using the “Add Your Comments” box below. He can also be reached at ara@aratremblytechnology.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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