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Is the IT Bubble Bursting Again?

Some major IT tech companies saw their shares plummet late last week. Many of those whose shares are falling the hardest are the ones that appeared overheated for some time. Despite the unemployment rate dropping to 4. 9 percent, the lowest since 2008, the number of new jobs gained last month fell short of the 185,000 expected, with only 155,000 gained. Meanwhile plunging oil prices, less-stellar fourth quarter earnings and economic jitters over troubles in China and other emerging markets have plagued the markets since the beginning of the year. All of this is triggering concerns that tech spending and IT hiring is going to be hit hard this year, though some believe such fears are overstated.  

Shares of data analytics, security and especially cloud providers took a hard hit Friday and continue to fall today. Tableau, whose value was cut nearly in half Friday after a disappointing quarterly earnings report, was down about 10% today; Splunk, down 20% Friday, traded down 12% today, as was security vendor Palo Alto Networks, down 20% on Friday and fell 9%  today. Major online and cloud provider Amazon was down 13% last week and 3% today; down 13% Friday and 7.6% today; Workday plunged 16% Friday and fell 10% today; and ServiceNow fell 11% Friday and 10% today. Overall, the tech-heavy Nasdaq average fell 1.8% today and the S&P 500 was down 1.4%

Meanwhile, the economic headwinds have taken its toll on IT hiring. According to the Bureau of Labor Statistics (BLS) only 5,500 IT jobs were added in January, down from 6,100 in December, which was only half the 12,300 added in November. In a breakdown by Foote Research Group, which tracks IT hiring, 93 percent of all IT jobs added over the past year accounted for all new IT jobs in December. Management and Technical Consulting Services added 2,200 jobs, sharply down from the 4,400 monthly average in 2015. Computer Systems Design/Related Services gained 3,400 jobs last month, just slightly less than the 3,800 added in December but sharply below the 6,842 monthly average in this segment for 2015.

Chief Analyst David Foot noted that there were volatile swings in IT job demand, both last year and the beginning of this year, but he sees some favorable indicators for IT employment. "It appears that IT employment is under a certain amount of pressure this year even though economists are suggesting that the American economy is holding up well despite a slowdown in China, growing risks in emerging markets and turmoil in the stock market," Foote said. "The financial markets are leery but the labor market still looks like it's continuing to grow." Foote Partners' compensation benchmark report shows salaries and demand for IT skills covering various areas remain strong, particularly for cloud and mobile platforms, database and data analytics, security, app development and a variety of methodology and process skills.

Adding to the mix is that it's a presidential election year, which always creates uncertainty. Nevertheless, it doesn't appear the volatile markets will have any bearing on shifts in technology either from the end user (client device) and datacenter (infrastructure and cloud) perspectives, nor should it impact this year's priorities.

How is the latest market meltdown affecting your views on IT demand and hiring?

Posted by Jeffrey Schwartz on 02/08/2016 at 1:35 PM


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