The Economy, IT Spending and Hiring

U.S. employment gains in May did poorly outside of government hiring while the amount of federal debt is poised to exceed the GDP by 2012. Meanwhile, Europe's economic growth stagnates. Nonetheless, according to a recent projections and surveys, global IT spending will jump this year and more than half of U.S. companies plan to hire more professionals in the second half of this year.

Focal Points:

• According to the U.S. Department of Labor Bureau of Labor Statistics, total nonfarm payroll employment grew by 431,000 in May – most of it reflected the hiring of 411,000 temporary employees to work on Census 2010. Private-sector employment improved by a mere 41,000, far below expectations causing overall concern about the rate of improvement of the U.S. economy. The U.S. economy has only added 573,000 net new jobs this year while 3.4 million jobs have been lost since the Stimulus Package was passed last year. The International Monetary Fund (IMF) projects the world’s largest economy to expand at a slower pace over the next five years than the 3.2 percent average during the past five decades. The IMF notes the government's total debt rose past $13 trillion for the first time this month and predicts the total amount owed will surpass GDP in 2012. Meanwhile, there is a risk of a renewed recession in Europe, according to U.S. economist Nouriel Roubini. He expects economic growth at best to be zero in the Euro zone.
• According to a biannual survey by Dice Holdings, a specialized career websites provider, more than half the U.S. companies surveyed said they plan to hire more professionals in the last six months of this year, with an increasing number also willing to pay higher salaries to new recruits. The survey included 800 companies, government entities and recruiting companies. About 52 percent of the employers and recruiters surveyed anticipate hiring more career professionals in the second half of 2010 than they did in its first half of the year. A quarter of employers and recruiters see salaries for new hires rising, compared to just 10 per cent reporting salary increases for new hires six months ago. Additionally, 69 percent of respondents believed that layoffs were not likely to occur in their companies within the next six months, an improvement over last November's 61 percent. Of the companies intending to hire more, 49 percent projected they would add up to 10 percent more employees compared to the first half of 2010, while 28 percent planned to increase hiring by 11 to 20 percent.
• IDC predicts global IT spending will increase by 3.8 percent in 2010 while Gartner Group projects a growth of 4.1 percent and forecasts national and international government IT spending to grow by 6.2 percent. Purchases of hardware equipment are expected to rise by 6.4 percent while software spending expands by 3.1 percent, according to IDC. However, the firm estimates IT services expansion will only gain 1.5 percentage points. Lastly, Gartner forecasts the banking and financial services sector to grow by 4.6 percent.

Experton Group believes the economy appears to be at an inflection point and could tip either way. Actions being coordinated by the G20 and other governments do not bode well for the private sector, nor the governments long-term. Therefore, Experton Group expects economic growth to stagnate in most countries, which will translate to revenue uncertainty or constrained revenue growth for most companies.  IT executives should expect budgets to become tightened in the latter half of the year. IT executives should look to self-funding projects to improve the odds of gaining executive approval and help close any financial gaps.