U.S. Q1 Technology Job Cuts Hit 7-year High

Planned job cuts in the U.S. technology sector have climbed to 84,217 in the first quarter, up 27 percent from 66,312 in the previous quarter, according to a report released this week by global outplacement firm Challenger, Gray & Christmas, Inc.

It was the largest quarterly job-cut for the sector since 2002, when 133,511 layoffs were announced in the fourth quarter, said the report.

The latest job cuts data in the sector which includes telecommunications, computer and electronics firms were nearly 4 times higher than the 17,345 cuts announced during the same period a year ago. Factually, the job cuts have increased in each of the last five quarters, growing by an average of 42 percent every three months.

Despite the surprising increases, quarterly technology job cuts remain well below the levels reached during the dot.com collapse that resulted in 1,163,742 tech-sector job cuts in 2001 and 2002, when employers announced an average of 145,467 job cuts each quarter.

Unfortunately, no industry appears to be immune in this recession. Even the health care sector, which has consistently added jobs throughout the downturn, is starting to see those gains shrink. And continued job creation in the federal government is being offset by large-scale losses at the state and local level, due largely to a rapidly deteriorating tax base, said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

In addition to job cuts, many tech firms took steps to cut employee's salary to reduce costs. Some of the famous technology firms, such as AMD, Seagate, Hewlett-Packard and Motorola, announced pay cuts in the first quarter, while some other big companies, including Yahoo, instituted pay freezes or suspended contributions to 401(k) plans.

But what's worse is that technology job cuts are expected to remain heavy in the coming months, according to Challenger.

We may start to see an increase in merger activity among tech firms, as they attempt to gain an economic and competitive foothold in this downturn. Most recently, IBM and Sun Microsystems have initiated talks over a possible corporate marriage, said Challenger.

Challenger pointed out that in most of these mergers, the first step taken to offset the cost of the merger is to eliminate redundant positions. For large entities like IBM and Sun, this could mean thousands of workers.

Source: Transportweekly