Fed says tech demand outstripping 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 has provided 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 -- demand for certain types of tech skills is outstripping supply.

The latest edition of the Federal Reserve's Beige Book, released this week, 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."

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

But here's the kicker: The National Association of Colleges and Employers (NACE) released its salary survey data this week, and reported that average starting salary for computer science graduates this year fell 2.5% from last year to $58,547 from $60,038. Computer science enrollments have been rising, 30% last year alone.

Norman Matloff, a computer science professor and leading H-1B critic, drew attention to the NACE report in a newsletter he sent out late on Friday, noting that computer science starting salaries being down "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 these firms are competing with "countless other start-ups and local companies" for skills, he said.

Among the skills most in demand is experience and expertise in building the Web infrastructure and applications that can handle millions of visitors, said McLoughlin. That kind of experience makes hiring difficult, he said.

In terms of programming and platforms skills, recruiters cited a broad range of programming languages, including Java, Ruby on Rails, and increasing demand for 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.

These big firms, such as Twitter, 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 "large compensation increases" in some other parts of the country as well for tech workers, including Atlanta and Kansas City. But in St. Louis, it said some tech firms reported plans to reduce employment.

This high demand is coming 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 it 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.

Hiring restraints at technology-using firms were found among the more than 100 CIOs Janco interviewed, said Victor Janulaitis, the company's CEO. "Most of the CIOs we interviewed do not feel they will be able expand staff size over the next 12 months."

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 e-mail address is pthibodeau@computerworld.com.

See more by Patrick Thibodeau on Computerworld.com.

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