U.S. federal stimulus money used for IT hardware, not hiring

As part of the economic recovery plan passed by Congress and signed into law earlier this year by President Obama, government agencies, private companies and non-profits are required to report the number of jobs created or saved by the stimulus package. Those job numbers are now available at Recovery.gov, and a sampling of them indicates that the money spent so far has been better for hardware than hiring.

Among the technology companies getting money from federal stimulus spending is Computer Sciences Corp. (CSC), which won two IT projects at NASA that total nearly US $10 million. But no jobs are being created with that money.

CDW Government Inc. received two contracts, one for $2.4 million and another for $3.9 million, both for computer equipment and services at the U.S. Department of State. On both contracts, CDW said the “cumulative effect” of the awards resulted in four retained jobs, such as account managers, field account executives, advanced technology account executives, sales specialists and sales management “as CDW-G is primarily staffed with these types of positions.”

Oracle Corp. was awarded $1.25 million for “custom computer programming services” for the Social Security Administration, but that project created no new jobs. Oracle declined to comment.

IBM was also awarded a Social Security Administration contract — this one worth about $8.5 million — to upgrade systems around the country. IBM put the number of jobs created or saved at 16.8.

In total, these projects represent about $26 million in federal spending and account for about 21 jobs either created or saved. The paucity of job creation seen to date, given the hundreds of billions of dollars allocated for the ailing economy, has raised questions about how well the stimulus package is working. Critics have argued that more needs to be done, given the nation’s 10.2 per cent unemployment rate, and even Obama himself is now planning a jobs summit next month.

But stimulus backers have countered that direct hiring is only one piece of the employment puzzle. To get a complete picture, the government says the job estimates need to include indirect jobs, which could be subcontractors, equipment orders, even money spent on restaurants and travel in support of the work.

The federal government estimates that for every $92,000 spent by the U.S. one job is created or saved, although that figure covers all occupations, including highly paid ones. The U.S. claims the stimulus money has created an estimated 640,000 jobs.

But drawing a line that connects the $787 billion stimulus package to tech hiring is difficult. The hemorrhaging of tech jobs may have stopped, according to the latest employment data, but there’s no way of connecting that with federal spending at Recovery.gov. The same is true for anecdotal employment indexes, such as jobs board Dice.com, which shows an increase in hiring activity in both contract and full-time employment. In July, Dice said it had 48,993 jobs listed, including contract work. It’s now at nearly 54,000, a 10 per cent gain.

This job creation is running up against some strong headwinds. The Hackett Group., a Miami-based consulting firm whose clients include many multinational corporations, released a report last week that estimates 1.95 million IT jobs will have been lost at large companies in the U.S. and Europe between 2000 and 2014 due to efficiency gains, offshoring and other factors. That means the IT recovery may be a jobless one.

In 2009 alone, Hackett estimates that nearly 630,000 back-office jobs were lost, including positions in IT, finance, and other administrative areas. More than half of those jobs were in IT.

In its report, the Hackett Group argues that many companies are concerned that once the stimulus money is used up “growth could slow again in the absence of a rebound in consumer spending. Consequently, executives are extremely cautious about adding cost. Thus, significant rehiring of laid-off back-office staff is not expected,” argued Hackett Group.

Much depends on how a company handles the recession — and any federal stimulus money it gets. One of the CSC contracts, for instance, totalled $5.1 million, most of it for a sub-contract to Silicon Graphics Federal Inc. A CSC spokesman, in an e-mail, said the contract was primarily for new hardware for the customer.

Asked about that contract, George Skaff, chief marketing officer at SGI, said that “the stimulus package creates business for many companies, including SGI. Whether jobs are created or not is not the main point, as different companies deal with recession differently.

“Some do layoffs and wait for the economy to turn around and then they hire back, and some do spend more on R&D to be ahead of the curve when the economy turns around, which is what SGI is doing,” Skaff said. “The real answer here is that the stimulus package did create interest in the Federal sector for SGI.”

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Jim Love, Chief Content Officer, IT World Canada

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