US report points to IT growth

The US technology industry is growing again after two years of layoffs and low profits, according to a report released by the US...

The US technology industry is growing again after two years of layoffs and low profits, according to a report released by the US Department of Commerce's (DOC's) Economics and Statistics Administration.

The report, "Digital Economy 2003", estimates that US IT grew by 6.4% in 2003, compared with 1.6% in 2002 and only 0.9% in 2001. The IT industry's total output of goods and services was $1.24 trillion in 2003, up from an estimated $1.17 trillion in 2002.

The growth of the IT industry doubled the rate of growth in the total US economy, which is an estimated 2.9% in 2003, according to the report.

The 110-page report, available online at http://www.esa.doc.gov/DigitalEconomy2003.cfm, does not deliver good news for IT workers, however. While IT spending among large companies seems to be picking up, that has not yet translated to increased IT hiring, said Kathleen Cooper, DOC undersecretary for economic affairs. But IT employment in the US seems to be stabilising, and she predicted that IT employment would soon begin an upswing.

Critics questioned whether the economic turnaround described by the DOC will mean more jobs for US workers. The Institute of Electrical and Electronics Engineers-USA (IEEE-USA) has seen some evidence of more IT jobs being advertised, said Ron Hira, chairman of the IEEE-USA's research and development committee. "But the market is still pretty bad in terms of employment," he added. "There's a lot of insecurity among our members."

If IT spending picks up, US jobs may not follow because of a growing trend toward moving IT jobs overseas, Hira said. "It looks like companies will start spending. The question is what those jobs will be and where those jobs will be located."

The DOC is trying to work with private groups to get a good understanding of the offshore outsourcing trend, Cooper said. Analyst firms have been making predictions, but the agency wants to have accurate counts of offshore outsourcing trends, as well as reasons for the outsourcing, she said, adding that better numbers on offshore outsourcing will help the agency decide policy directions.

"We're all trying to understand exactly how many jobs have been lost," Cooper said. "Any loss is more than we'd like to see."

Offshore outsourcing and unemployment among IT workers are important issues to the agency and the Bush administration, Cooper said.

"That downward slope depicts a lot of pain," Bond said of IT employment.

The DOC report notes that the number of U.S. workers in IT occupations totalled 5.9 million in 2003, down 8% from 2000. Salaries for workers in IT-producing industries declined 1.3% from 2001 to 2002, while the average annual wage for all private workers increased 1% that same year.

Other statistics from the report:

Hardware output grew 26% in 2003, while the two categories communications services and software/services each grew less than 2%. Those statistics show an upturn in the telecommunications industry is not yet here, Bond said.

Research and development in the IT sector grew in 2000 and 2001 after dropping between 1998 and 1999. The report estimates IT companies spent $31.2bn on R&D in 2001, up from $26bn in 2000 and $22.6bn in 1999. The report estimated that US companies spent a total of $181.6bn on R&D in 2001, up from $133.6bn in 1997.

The U.S. exported $110.3bn worth of IT equipment in 2002, down from an export high of $162.5bn in 2000. Total IT imports to the US stood at $196.7bn in 2002, but Cooper attributed much of the $86.7bn trade deficit to US companies importing parts or products from factories they owned outside the US.

The report did not attempt to predict growth for 2004, instead providing a "snapshot" of the industry at the moment, but Cooper said she hoped the upward trends that started in 2003 would continue. "The recent trends give us encouragement that 2004 will be better than 2003," she said. "We've weathered our first IT-era recession, and now the economy is looking strong."

Grant Gross writes for IDG News Service

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