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Area Tech Firms Growing Despite Worker Shortage

Led by Northern Virginia, the Washington area's technology companies continue to grow at a strong pace despite widespread shortages of technology workers, according to Labor Department reports released this week.

This seeming contradiction has a simple explanation, analysts said. If not for the worker shortage, the technology companies -- and the region's economy -- would be growing even faster.

"For the Maryland suburbs and Northern Virginia the biggest economic challenge for the rest of the decade is the ability to find workers," said Crestar Bank economist Russel C. Deemer.

The worker shortage is not stopping growth, but it is stunting it, causing missed business opportunities, delaying the introduction of new technology and forcing employers to steal one another's most crucial knowledge workers, according to Deemer and other analysts.

Booz-Allen & Hamilton Inc. has about 700 vacancies in its worldwide staff of 5,000 technology services employees, its chairman, William F. Stasior, said. Most are in the Washington region, where its technology business is based.

"If we had those people today. . . . We could probably be generating another $50 million worth of revenue a year," Stasior said.

"So there's probably a loss of 10 percent [in] revenue just because of the shortage of people."

But much of the business is delayed, not lost, he added.

The most recent jobs data confirm the continued strength of Northern Virginia's economy. The area added 40,000 jobs between September 1996 and 1997, the latest figures available, for an annual employment increase of 4.2 percent. That rate keeps the Virginia suburbs among the nation's leaders in job creation, Virginia's Employment Commission reported yesterday.

According to William F. Mezger, commission senior economist, more than half of that job growth comes from technology employment. In other words, while Northern Virginia is struggling with an estimated 20,000 job vacancies, according to several industry surveys, at the same time it is adding at least 20,000 technology jobs a year, Mezger said.

Employment in "business services" in Northern Virginia, which includes the area's huge contingent of computer services workers, rose by more than 11 percent between September 1996 and 1997. The "engineering and management services" category was up more than 7 percent, Mezger noted.

Maryland continues to trail Virginia in job growth, but it, too, is experiencing a strong pickup in technology jobs, particularly in biotechnology, according to M. Anirban Basu, an economist with the Regional Economic Studies Institute at Towson State University.

Between 1995 and 1996, technology jobs in Maryland rose by 2.5 percent, state officials said. Overall employment in Maryland in September was 1.8 percent above September 1996, while in Maryland's D.C. suburbs job growth was up 1.4 percent for that period. That growth rate is likely to rise several percentage points as the state refines its employment calculations, said Patrick Arnold, director of the Division of Employment and Training.

"We're pretty pleased with that number," he said. By comparison, overall job growth nationwide is increasing by about 2.2 percent annually.

The District continues to lose jobs -- counting both resident workers and commuters -- primarily because of government downsizing. But the work force shrinkage is less severe this year than in the recent past. District employment in September totaled 612,700, down 1.3 percent from the previous September. In 1996, the D.C. job base shrank by more than 3 percent.

The scarcity of workers in the suburbs is confirmed by the extremely low jobless rates there. Unemployment this year has averaged just 2.4 percent in Fairfax County, 2.3 percent in Montgomery County and 2.6 percent in Arlington County. All are well below the national jobless rate of 4.9 percent in September.

But the size of the tech worker shortage may be exaggerated somewhat by the constant job-hopping that occurs, said Stephen S. Fuller, a regional analyst at George Mason University.

"I don't want to diminish the problem of unfilled jobs," Fuller said.

"A lot of the job vacancies in technology aren't new jobs, it's the churning that's going on" as companies raid one another's workers, he said.

But whether the shortage comes from unfilled new jobs or empty old ones, the impact on companies is likely to be the same, Fuller added.

AREA JOB GROWTH

Percent change in number of all jobs

Sept. 1995 to Sept. 1996 Sept. 1996 to Sept. 1997

D.C. Metro

area 0.8% 1.8%

Maryland 1.2% 1.8%

Maryland

suburban 1.6% 1.4%

Virginia 2.3% 2.3%

Virginia

suburban 3.6% 4.2%

D.C. -- 3.3% -- 1.3%

SOURCE: Bureau of Labor Statistics