Technology Investments May Be Slowing Job Growth, At Least for Now

Does business investment in technology come at the expense of hiring? A Forrester  report, Caution: IT Investment May Be Hurting U.S. Job Growth, says it might.

In a blog post, Forrester analyst Andrew Bartels says the issue arose as he looked into why the burgeoning economic recovery wasn’t significantly creating jobs. One theory: Companies were putting cash into technology instead of hiring. That would be a departure from past recoveries, when IT and hiring investments moved in parallel.

What I found suggests that in many industries businesses have been investing in technology instead of hiring…. 41 of the 62 non-government industries in the North American Industry Classification system increased their IT investment over this period while cutting employment at the same time. In a fifth of the industry groups, the contrast was especially sharp, with tech investment rising by 10% per year from 2007 to 2010 while employment was down by 7% on average. This pattern was most pronounced in manufacturing industries like mining, forestry products, fabricated metals, motor vehicles, and machinery. In a quarter of industries, tech investment rose by 7% on average while employment was down by 2% on average.

The data shows correlation but not necessarily causation, Bartels points out. There’s more study to be done, and he’s generally optimistic that job creation will catch up with tech investment as the recovery continues. And there is some good news in all this: Hiring in general may be slow, but all this investing in IT can’t help but create new positions for tech pros.

— Don Willmott