Report: Tech Job Cuts at a 6-Year Low

The number of job cuts in the tech sector plunged overall in Q2, but e-commerce layoffs are up and more telecom job cuts are expected, consultants say.

Showing a 26 percent reduction in job cuts, the second quarter of 2006 was a great one for the tech sector, according to a report issued July 13 by Challenger, Gray & Christmas, a Chicago-based global outplacement consultancy.

The number of Q2 job cuts was the lowest in nearly six years, according to the report. Only 29,226 jobs were cut, compared to 39,379 in Q1, and the fewest since 26,583 jobs were cut in the third quarter of 2000.

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The report found that the decline in job cuts in the tech sector—encompassing telecommunications, electronics, computers and e-commerce—is reflective of a decline in job cuts across all industries, which saw a 29 percent drop between Q1 and Q2.

In addition, the report notes that Internet firms such as Google, which announced plans the week of July10 to bring 1,000 jobs to Michigan, added to the job growth, as did booming ad sales across the Internet.

The vast majority of tech job cuts that did take place were a result of merger and acquisition activity in Q2, with corporate marriages resulting in 36 percent of job cuts, or 24,801 jobs, through June.

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Because the first order of business after a merger is typically to shed redundant workers to offset costs, and a "deluge" of telecommunications mergers were announced in the first half of 2006, an upswing in tech job cuts is expected in Q3 and Q4.

The promising numbers are also mitigated by a surge in layoffs among e-commerce firms, with the number of job cuts by e-commerce firms increasing tenfold from 139 in Q1 to 1,394 in Q2.

The report predicted that it is unlikely that tech spending will sustain its current pace, and expressed concern over higher costs related to energy, raw materials and recent predictions of a second-half slowdown in business spending on tech products.

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