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Techies left out of economic recovery

Many tech workers are feeling left out of the nascent economic recovery, but historically the job market lags other economic indicators as the nation pulls out of a recession.

Mike Landolfi spends his morning watching the stock ticker and CNBC, and he knows the economy is poised for a rebound. But macroeconomic optimism hasn't trickled down to his level.

The former information technology manager of FleetBoston Financial has been unemployed since December 2000. Despite sending out resumes and meeting with recruiters and career counselors, Landolfi hasn't been able to finesse three decades of IT experience into a full-time, senior-level position within 35 miles of his home in Chelmsford, Mass.

"The longer I've been out, the harder it gets," said Landolfi, who took a night-shift stint checking tax returns for the Internal Revenue Service for $13 an hour after his severance expired. "The worst part is the waiting--you're in the job hunt and getting close, but then you don't hear anything. You go into a dark hole and wait and wait, and that's when it really gets to you, especially when you find out that the job just disappeared."

In addition to spending more time with his wife and recently adopted daughter, Landolfi comforts himself by knowing that he's got plenty of company among laid-off technology executives. Despite positive economic indicators and the Federal Reserve's indication Tuesday that it is less concerned about economic weakness, the job market remains mired in the doldrums. And it seems especially bleak for tech workers.

Historically the job market has lagged other economic indicators as the nation pulls out of recessions, sometimes by as much as six months to a year. In fact, many economists believe unemployment, which hit 5.7 percent in November, could increase to as much as 7 percent later this year--the highest rate since 1993.

That's much lower than the unemployment rate of previous downturns, including the 1990 to 1991 recession, when unemployment topped out at 7.8 percent. But unemployment in the tech sector, which was particularly stung during the downturn in 2000 and 2001, may remain higher than that of the rate for the population at large.

The unemployment rate for Santa Clara County, the heart of California's Silicon Valley, was 7.3 percent in February. The Association of Bay Area Governments is bracing for that number to hit as high as 8 percent in the upcoming months.

The situation isn't brighter in smaller tech hubs, including Boston; Austin, Texas; and the Research Triangle area of North Carolina. Tech workers have also struggled in Colorado, which has a higher percentage of tech workers than any other state because of the concentration of telecommunications companies.

Jeff Petersen of Highlands Ranch, Colo., has been scraping by with consulting gigs on IT projects since a layoff last year from Teletech Holdings, which slashed his entire business unit. But even the consulting jobs have dried up since the third quarter of 2001.

Like many laid-off tech workers, Petersen says bright spots in the stock market and optimistic comments from Federal Reserve Chairman Alan Greenspan do little to perk him up; the recovery will seem like a moot point until he gets a solid job.

"This job market has killed my self-esteem," said the 42-year-old father, who spends time with his baby daughter when he's not scouring job boards, networking or checking out local career management firms. "I cannot tell you the difference in my outlook on life from the time I was busy to now, with too much time on my hands."

Productivity gains, job market losses
Ironically, the high-speed servers and automated Web services that helped usher in the late 1990s boom also allowed companies to rely on fewer workers--particularly in customer service and other support functions. Career experts say the jobs in the tech sector will remain scarce because of the productivity gains that tech workers enabled.

For instance, Dell Computer slashed 5,400 positions in 2001 in a massive downsizing that included as many as 4,000 layoffs. Although profits dropped 43 percent, Dell shipped 18 percent more personal computers in 2001 than in the previous year--an increase in productivity that could lead hiring managers to question the need to rehire any of the people the company laid off.

Also, many executives say their companies cannot afford to purchase new hardware or software because they gorged on cutting-edge technologies in the late 1990s.

According to a March survey of 100 American and European chief information officers by Merrill Lynch analyst Steven Milunovich, 56 percent of CIOs said that "meaningful improvement" in IT spending would not happen until 2003. Although many acknowledged they'll purchase software this year related to enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management, 34 percent said they did not need more servers to run the new applications.

Another factor contributing to the hiring doldrums is venture capitalists' fear. They were among the hardest-hit investors when the bubble burst in the spring of 2000, and they're loathe to lavish cash on start-ups--unlike in the late 1990s, when funding encouraged bloated staffs. VC firms that are investing at all are usually offering "maintenance" rounds to keep the business afloat, not "expansion" rounds for new hires.

"A lot of companies are still cutting work forces, or at least holding them stable," said Deepak Kamra, a general partner at Canaan Ventures in Menlo Park, Calif. "I don't have a crystal ball, but I'd say that you'll wait at least a quarter for companies to do more hiring--and that's if the stock market picks up. I'd be surprised if we ever got back to the job market of the first period of 2000 on a sustained basis."

VC bleakness is bad news for Scott Hazen Mueller, an Internet operations manager who was laid off from a Sunnyvale, Calif.-based Internet service provider in July 2001. Three months after that layoff he accepted a job as a project consultant, but that dried up after five months. He's been unemployed ever since, watching his savings dwindle and going into debt.

"It's been pretty ugly, especially the Web job boards," said Mueller, 38, who lives near Modesto, Calif., and originally began looking for jobs in the Silicon Valley. "I've sent out something like 500 resumes, and in the last seven months I've had one interview...I'm willing to go wherever it takes. I'm talking to one recruiter for a job in Columbus, Ohio, and another in the Los Angeles area."

Mueller's spirits have lifted in the past few weeks because his phone has started ringing with calls from recruiters. Although none have resulted in interviews or offers, he's happy they're at least returning his calls.

"I've seen as much activity in the past week as I've seen in the past seven months," said Mueller, who boosted his salary by switching jobs three times in the past five years. "Maybe things are rebounding. At this point, I only want to go to work for a solvent company where I can stay for a good, solid five years. I'm ready to settle down."