23-24 FY IT Jobs Market Update: Gloom and Boom

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360 applications in 36 hours

There is no doubt that the IT jobs market has softened considerably over the course of the financial year.

At Balance, we have seen significantly decreased permanent demand across the year but with fairly robust demand for contractors.

The Gloom

There are now a number of pockets of the market where the situation has flipped from a ‘candidate is king’ situation to entirely employer driven. Specifically, most roles in the project space are seeing the supply of candidates significantly outstrip demand. At Balance, we pride ourselves on the quality of our advertising, but receiving 360 applications to a Project Manager (6-month contract) advertisement in 36 hours really did blow our minds.

We’re also starting to see the first signs of desperation from some candidates. For that PM role, some of the candidates showed plenty of hustle and apparently started Googling the mobile numbers of anyone who worked for Balance. All of our Consultants received multiple calls asking if they could be introduced to the Recruiter managing the role. Yes, we did take the ad down and we’re still working our way through the applicants.

So how tough is it out there? We speak with hundreds of candidates a day and we’re hearing repeated tales that many large employers are finishing contractors early and/or laying off permanent staff. We’re hearing this from multiple sources about Westpac, TfNSW, Sydney Water as well as many mid-sized players. Additionally, as the cost of finance has increased, the availability of easy funding for start-ups has dwindled, resulting in the closure of a number of businesses.

With the election of Labor governments in NSW and Federally, there has been a strong push to move away from their use of a casual/contractor workforce and an attempt to transition contract roles to permanent. The governments’ permanent roles pay a mere fraction of the contracting rate, so this will be a battle of wills; and I firmly believe the contractors will win. Currently mid-level IT management roles and mid-senior technical roles for the NSW government pay around $120k-$130k base. Government contractors will move to the private sector rather than accept those salaries. With the stench of the PWC scandal hanging over the consulting sector, it’s going to be tricky for governments to figure out how to deliver large programs of work with impediments to hiring expertise across every traditional channel.

Federal Government IT Contract Value by Year

The Federal Government’s IT purchasing marketplace, BuyICT, has seen a significant reduction in the volume of opportunities advertised and services being purchased (including IT contractor engagements). At the time of writing there were 78 open opportunities, some two-thirds of the number at this time last year.  The graph above shows that that the Government awarded ICT contractors worth $6B in 2021 but only $1.1B for the half year to June 30, a monumental decrease.  At a state level, the new Government is still at the reprioritizing stage, with old initiatives being dismantled and new ones yet to start.

Ad Numbers

As long-time readers would know, I’ve been tracking the number of Seek ads since before the pandemic. Total Seek jobs ads are still over a third higher than pre-pandemic levels (Current – 200,000 ads vs Pre-pandemic – 150,000 ads), but are 25% down on the peak of the boom (Current – 200,000 ads vs Peak – 260,000 ads). With the current unemployment rate of 3.6%, it’s unsurprising to see so many businesses, in almost every sector, still looking for staff.

The story is very different in the IT space. There are a lot of factors in play when looking at Seek job ads. The main one being that LinkedIn has become a far more effective candidate sourcing platform, as many of the most-sexy employers have fled from Seek. IT job ads are now down 25% on pre-pandemic levels (11,800 – Current vs 15,500 – pre-pandemic) and 36% below last year’s peak (11,800 – Current vs 18,500 – Peak). IT job ads now represent less than 6% of total job ads compared to 10.5% pre-pandemic. Additionally, sources within LinkedIn tell me they are also seeing reductions in IT ad volumes though not to the extent of Seek.

The Boom

But it’s certainly not all bad news. I’ve worked in some terrible markets over the years…. Post 9/11 in 2001, GFC in 2008 and the pandemic in 2020. This is not even close to any of those.

There are still large areas of the market where it’s still incredibly tricky to find talent. And yes, I’m looking at you Modern Workplace Engineers. Other areas that are still highly problematic are Cyber, Software Engineering and Networking. The candidates within these skillsets understand their market worth and largely refuse to negotiate.

So it’s a 2-speed market? Actually, it’s more complicated. There are many instances where if you add a hard-to-find skill to an easy-to-find role, you’ll have a very limited candidate pool comprised of candidates who are acutely aware of their value. A great example of this is a recent role for a BA requiring specific CRM package implementation experience. We received huge levels of interest from highly negotiable BAs without that CRM experience and limited interest from candidates with the skill set who are very much unwilling to negotiate.

Predictions for 2023/24

New year, new budgets. The majority of Australian employers operate on a July to June financial/budgetary year. And these budgets invariably contain funding for new projects. However, I would not be expecting vast swathes of funding beyond current levels and thus I’m not expecting any sort of IT project revival. On the other side of the demand curve, we are not seeing high volumes of skilled immigrants with experience in the areas of shortage and only moderate slackening of demand. I predict that prices will remain fairly similar throughout the year and the good candidates will still have multiple offers.

The key driver of demand over the foreseeable future is global inflation. If the genie goes back in the bottle, we will see a significant rebound in business confidence and consumer behaviour. Businesses will open their purse strings and the IT jobs market will be buoyant. If the genie proves stubborn, it’s going to be a rough couple of years.

For those on the sidelines who are struggling to secure a role, you will need to be well networked, highly skilled, negotiable and persistent to be successful.

For employers, they should avoid the temptation to drive too hard a bargain, and try to treat every candidate with respect and dignity. People have long memories and every market rebounds.