Fed says tech skills demand outstrips supply in Boston, San Francisco

But the average starting salary for new computer science graduates said to be down this year by 2.5%

The IT employment outlook is nothing but mixed signals. Tech employment is showing signs of slowing, but not everywhere. Now the Federal Reserve is saying that in some markets -- Boston and San Francisco -- employer demand for certain types of tech skills is outstripping supply.

The latest edition of the Federal Reserve's Beige Book, as the central bank's commentary on regional economic conditions is called, said that in the New England area in particular, "there remains a shortage of skilled technical workers to fill high-end IT and engineering jobs. The general consensus is that despite a large pool of available workers, the skills mismatch prevents staffing firms from fully meeting client demand."

The situation in San Francisco is similar. The Fed reported that demand in the Bay Area is forcing employers "to compete vigorously for a limited pool of qualified workers" and the competition is "spurring significant wage growth in these slots."

But there's another side to the story: The National Association of Colleges and Employers (NACE) released its salary survey data this week and reported that the average starting salary for computer science graduates this year fell 2.5% from last year, to $58,547 from $60,038. Meanwhile, enrollment in university computer science programs has been rising, 30% last year alone.

Norman Matloff, a computer science professor and a leading critic of the H-1B visa program, drew attention to the NACE report in a newsletter he sent out late on Sept. 6. He said that the decline in starting salaries for computer science graduates "highlights the fact that, in spite of the industry lobbyists' claims, hiring in the computer field is a buyer's market."

But in Boston, it may be a seller's market. Tech recruiters agreed with the Fed's assessment, saying it's hard to fill jobs. And wages are shooting up.

Sean McLoughlin, the technology practice director at HireMinds, said the hiring demand was increased by recent decisions by Google, Amazon, PayPal and Twitter, among others, to open offices in the Boston area. All of those companies are competing with "countless other startups and local companies" for skilled workers, he said.

Among the skills most in demand are experience and expertise in building the Web infrastructure and applications that can handle millions of visitors, said McLoughlin. It's difficult to find people with that kind of experience, he said.

When it comes to programming and platforms skills, recruiters cited a broad range of programming languages that are in demand, including Java, Ruby on Rails and, increasingly, Python.

Twitter opened an office this year in Boston and has 16 technology positions posted. However, one position may represent multiple openings, said David Freier, who founded ICI Software Recruitment.

Twitter and the other big companies that have set up shop in Boston are creating a lot of competition, said Freier. "They are all in Boston, and they all suck in huge amounts of programmers," he said.

"Salaries have shot up over the last six months," said Freier, who said 10% to 15% increases are now the norm.

The Fed reports that there have also been "large compensation increases" for tech workers in some other locales, including Atlanta and Kansas City. But it's a different picture elsewhere. In St. Louis, for example, the Fed said some high-tech companies reported plans to reduce employment.

The rise in demand in certain markets comes as tech employment is showing signs of slowing nationally. In August, IT employment reached just more than 4.5 million, according to TechServe Alliance, an IT services trade group that tracks month-to-month employment data.

To put that figure in perspective, at the start of the recession in 2008, tech employment reached 4 million before losing thousands of jobs over the next two years. In August, the U.S. added 169,000 jobs, and of that number 6,800 were tech jobs, or about 4% of the total, TechServe said.

Despite the demand in places such as San Francisco and Boston, the rate of tech job growth nationally "has decelerated," said Mark Roberts, CEO of TechServe. He believes one cause may be lack of adequate supply of tech workers.

Janco Associates, which also tracks the month-to-month numbers, reported a slight decrease in new IT jobs, noting that hiring is trending down. It counted 7,000 new tech jobs added in August.

Janco interviews with more than 100 CIOs revealed hiring restraints at technology-using organizations. "Most of the CIOs we interviewed do not feel they will be able expand staff size over the next 12 months," said Victor Janulaitis, the company's CEO.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at  @DCgov, or subscribe to Patrick's RSS feed . His email address is pthibodeau@computerworld.com.

See more by Patrick Thibodeau on Computerworld.com.

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