Tech Firms Fare better than most in Jobs Slump

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NEW YORK - Technology appears to be one of the least hard-hit sectors in an economy beset by unemployment at a five-year high.

The Labor Department reported Friday that companies slashed their payrolls by 84,000 jobs last month, sending the country's unemployment rate to 6.1 percent from 5.7 percent in July.

Automakers and housing-related manufacturers were among those losing the most jobs during the month, while education, health and government saw job gains. But unlike in 2001, when a bust in the technology sector — accompanied by massive layoffs — played a central role in sparking a recession, this time around the industry is more insulated.

"Overall technology employment is up in America and the wages associated with it are up," said John McCarthy, a vice president with Forrester Research.

In a few corners of the high-tech world, the results were especially striking: Payrolls of computer and electronics manufacturers grew 5.1 percent from July to August, according to the Labor Department's data. There was a 6.3 percent increase in the work forces of computer-systems designers and related services providers.

This is not to say the industry is immune to a downturn, McCarthy said, as it seemed to be in its early years, starting in the 1970s through the 1990s. The technology sector has matured, which means it is becoming more susceptible to the ups and downs of the economy.

For example, even rapidly growing companies like Internet search leader Google Inc. are becoming more cautious as the economy crumbles. During the spring, Google added 448 workers, the fewest employees it had hired in a three-month period since the final quarter of 2004.

But management has indicated the hiring pace accelerated during the summer as Google tried to pluck the most promising graduates from college classes. Google ended June with nearly 20,000 employees, up from 3,000 workers at the end of 2004.

Within the technology sector, software vendors — whose products can help other companies automate processes and save money in downturns — have held up particularly well so far, said Andrew Bartels, a Forrester vice president. And large U.S.-based companies have been able to offset weakness domestically with solid growth overseas.

One example is Hewlett-Packard Co., the world's largest PC maker, which has 176,000 employees worldwide. It continues to add jobs in the U.S. despite the economic downturn, including researchers for its HP Labs division and customer support staff in Arkansas and New Mexico.

Still, several big tech companies have announced plans to let workers go since the start of this year. In January, chip manufacturing equipment maker Applied Materials Inc. announced it would cut 1,000 jobs, or 7 percent of its work force — its biggest reduction since 2002. And beleaguered mobile phone maker Motorola Inc. said in April it would lay off 2,600 of its employees, bringing its total number of cuts to more than 10,000 since last year.

Bartels said that while he wouldn't rule out rounds of layoffs in the tech sector, he also "wouldn't expect to see big ones."

In general, technology companies are experiencing a slowing of growth, but not an overall decline in business. In such a case, Bartels said, one of the things companies try to protect is their staff. Before they will cut payrolls, they'll cut contractors and equipment, for example.

"They know (their staff) is a valuable asset," he said.

Microsoft Corp. has been keeping a close eye on the economy but hasn't curtailed its hiring yet because the software maker is developing new products and expanding in so many different areas, including video games, music and the Internet, spokesman Lou Gellos said.

"We are not immune to the challenges, but we have been able to weather the storm better than most," Gellos said. "It's still full steam ahead for us."

Microsoft hired more than 11,000 additional workers in its fiscal year ending in June — the most in its 33-year history. It has about 92,000 employees, including roughly 55,000 in the United States.

Less prosperous tech companies have had to tighten their belts during the tougher times. Yahoo Inc., for instance, jettisoned more than 1,000 workers in February this year after a two-year stretch of declining profits.

But while the company still isn't performing up to investor expectations, Yahoo already is preparing for better times and has increased its payroll again to 14,300 employees — the same size of its work force before the February cutbacks.