IDC lowered its forecast for IT spending growth this year, signaling the possibility of job cuts for certain segments of the tech industry. Despite that, the tech job market overall continues to grow.
IT spending growth is expected to increase 4.9 percent this year to $2.06 trillion – a lackluster performance compared to IDC’s previous forecast of 5.5 percent. Last year, IT spending grew 5.6 percent, according to IDC’s report.
The effects of the federal government’s belt-tightening sequester, the European debt crisis and a weakening GDP in China are contributing to the economic uncertainties prompting IT customers to reign in their spending plans. IDC says a number of technology vendors faced greater challenges in closing deals toward the end of the first quarter. In turn, this is resulting in some companies laying off staff while others slow down their hiring.
Where Hiring May Get Hit
Some tech sectors will feel the spending slowdown more than others, says Eduardo Martinez, a senior economist with Moody’s Analytics.
“On the manufacturing side, you usually see an impact to jobs about a quarter or two after there’s been a slowdown in billings (orders),” Martinez says. “The correlation between manufacturing softness and job reductions are more precise. But for technical services and R&D, the impact is diluted.”
Research and development entails work that is usually based on projections far into the future, Martinez notes, so those jobs are less at risk if the economy hits a blip from one quarter to the next.
Another area at less risk is technical services as companies increase spending on services that makes their businesses run more efficiently with less people on the payroll.
Deep Dive into IDC’s Numbers
On the manufacturing front, IDC now expects PC spending to decline 3 percent this year, marking three consecutive years of faltering revenues. Some manufacturers, like HP, have already taken steps to reduce their headcount.
However, the picture’s better when you throw tablets into the mix. The combined PC-tablet revenue growth rate is expected to remain stable at 4 to 5 percent. By themselves, tablets are expected to post a whopping 32 percent growth rate in revenue this year, while smartphones are expected to see revenue growth of 17 percent.
“Just as outsourcing got its boost from the 2001 recession, and virtualization from the financial crisis of 2009, low-cost mobile devices and the cloud are being partly driven by the willingness of businesses to look for new ways of getting things done in return for improvements in efficiency, scalability and cost of ownership,” said Stephen Minton, IDC’s Global Technology & Industry Research Organization vice president, in a statement.
IDC also lowered its forecast for software spending growth to 6 percent this year, down from its previous forecast of 7 percent. Part of the drop stems from the popularity of cloud services, which allow companies to avoid direct investment in software and hardware platforms. So, IT services are expected to grow 3.8 percent this year.
But IT Jobs Still Growing
Despite IDC’s projections the overall number of technology jobs has been steadily growing throughout the year. In April, technology related jobs grew 2.6 percent, to 14.3 million jobs, compared with the same period last year.
Where there is softness in the tech job market, it seems to mirror the spending trends. Computer and electronic product jobs, for example, continued to post declines in year-over-year growth. That falls in line with IDC’s soft revenue growth projections for the PC industry. According to the Bureau of Labor Statistics, computer and electronic product jobs fell 1.4 percent, to 1.08 million jobs, in April.