Services Firms Muscle UpServices Firms Muscle Up

Software, for the most part, bests hardware, at least as an employer of U.S. IT workers.

The Labor Department released figures Friday showing an increase of 112,000 in nonfarm employment in November, including a nearly 10,000-worker payroll increase among IT-services firms. Looking at it one way, last month's increase of employment at companies furnishing systems design and related services represented nearly 9% of the total job growth in the United States.

The same report, however, showed a drop of 3,800 people working for makers of computers and peripherals. Another segment of the IT arena--a category known ISPs, search portals, and data processing, which includes software vendors--experienced a miniscule drop of 300 jobs in November.

Since November 2003, employment among IT-services firms has risen 4.4%, to more than 1.15 million. During that same period, the ISP, search-portals, and data-processing sector grew by 2,000 jobs, or 0.5%, to 404,600.

During the past 12 months, computer and peripheral makers have trimmed their payrolls by 2.4%, to 213,000 jobs--a loss of 5,300 jobs. As a comparison, nonfarm job growth since November 2003 has climbed by nearly 2.05 million workers, or 1.6%, to nearly 132.08 million.

Scott Brown, chief economist at the brokerage Raymond James & Associates, attributes the growth in employment at IT services firms in part to a reluctance by employers to hire their own full-time personnel.

"It's expensive to hire people, considering health-care and payroll taxes," Brown says. "Hiring temps or outsourcing these kinds of services is one way out of that."

Brown sees two chief reasons for the decline in computer-manufacturing employment: More IT wares are being produced overseas, and businesses aren't buying as much hardware as they did during the boom of the late 1990s, when many companies built their information infrastructure.

The Bureau of Labor Statistics each month surveys 160,000 businesses and government agencies, covering about 400,000 individual work sites. That represents about one-third of all nonfarm payroll workers.