U.S. Economy Adds Jobs, Yet IT Sector Shrinks; Tariffs Challenge Tech Giants' Financial Outlook

[00:00:02] It's Tuesday, May 6th, 2025, and I'm Dave Solt. Four things to know today. The U.S. economy adds jobs, but IT roles decline as tech professionals exit the field. Hyperscalers double down on AI infrastructure despite mounting tariff concerns. Major firms like IBM and Intel signaled trouble ahead amidst the economic conditions. And GTIA names Dan Wensley's CEO, raising both hope and hard questions for MSPs. This is the Business of Tech.

[00:00:32] The U.S. job market continues to show resilience despite ongoing trade tensions, with April reports indicating the addition of 177,000 payrolls. This marks a slight slowdown from March's 185,000, yet the unemployment rate remains historically low at 4.2%, according to the Bureau of Labor Statistics. Economist Sam Toombs from Pantheon Macroeconomics notes that while the job market appears stable, uncertainties surrounding the trade war could

[00:00:59] eventually impact hiring. The Labor Department's data suggests that the economy was in decent shape leading up to recent tariff announcements, although the implications of changes in trade dynamics may take time to manifest in broader economic indicators. The U.S. job market may have expanded more than expected in April, yet information technology professionals are largely not reaping the benefits. According to JANCO Associates,

[00:01:23] over 10,600 IT jobs were lost in April following similar losses in March amidst a broader decline of 214,000 tech jobs reported by CompTIA. JANCO's CEO noted that many displaced IT professionals are leaving the sector altogether, with the unemployment rate for IT professionals dropping slightly from 5.0 to 4.6%, while overall tech occupation unemployment rose from 3.1 to 3.5%. The increasing

[00:01:51] reliance on automation and the impact of economic policies have led to a cautious hiring environment with firms hesitant to invest in new talent. Tim Herbert, Chief Research Officer at CompTIA, noted that although the data was disappointing, it was anticipated given the current economic circumstances. He also mentioned that employer job postings in the tech sector remain steady, suggesting that hiring may resume as companies adjust to the ongoing challenges. Despite the

[00:02:18] overall decline in hiring, demand for artificial intelligence roles has seen a surge, with more than 55,000 new job postings in this field, marking an increase of 184% year-over-year. Analysts indicate that the true impact of tariffs on the labor market will unfold over the coming months. For instance, ocean container bookings from China to the U.S. have plummeted by 60%. Major companies like General Motors and Delta Airlines have withdrawn their financial forecasts

[00:02:46] for the year. Economic sentiment appears to be shifting, with banks increasing recession risks and inflation concerns as consumer sentiment declines. Why do we care? Companies like General Motors and Delta Airlines withdrawing financial forecasts is a red flag. These are signals that capital and operational spending, including IT, may be frozen or re-evaluated. This affects every IT initiative from hardware refreshes to digital transformation roadmaps. Clients are thinking in

[00:03:16] terms of resilience, efficiency, and risk. Your offerings should be repositioned accordingly. Not backup modernization. Instead, ransomware recovery assurance. Not cloud migration. Instead, fixed cost infrastructure with predictable uptime. Not AI tool deployment. Instead, AI governance for CFO risk oversight.

[00:03:39] So double down on client business understanding. Now's the time to deepen client discovery. What sectors are they selling into? What suppliers are they dependent on? Entail your services to buffer the operational impacts they're anticipating. And offer scenario planning and forecasting help. With clients unsure about the future, those who help model IT-related risks, dependencies, and resilience strategies become

[00:04:03] trusted partners, not just vendors. And note the impact on your own business. The divergence between broader labor and labor growth and IT job losses suggests that traditional macroeconomic signals like payroll growth and unemployment rates no longer track cleanly with tech employment. IT services leaders must look beyond headline job reports to understand their talent market. This episode is supported by Comet Backup.

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[00:05:24] solid earnings, indicating resilience in their spending on data centers and infrastructure despite concerns about a potential industry slowdown due to tariffs. Meta raised its spending forecast for 2025 by approximately 8%, citing increased investments in data centers to support artificial intelligence. Microsoft maintained its spending guidance for the second half of the year, aligning with its earlier predictions, while Amazon increased its first quarter spending by $10 billion compared to last

[00:05:51] year, focusing on technology infrastructure for its AI services. Both Meta and Amazon acknowledged rising costs due to tariffs, with Amazon CEO Andrew Jassy noting tariffs were mentioned 17 times during their earnings call, yet demand from customers remains robust for now. Microsoft reported a significant increase in its capital expenditure, rising from $14 billion in the same quarter last year to $21.4 billion.

[00:06:17] Microsoft's cloud unit revenue reached $42.4 billion in the first quarter of 2025, exceeding analyst expectations and reflecting a 20% year-over-year growth in its artificial intelligence data center services. CEO Satya Nadella highlighted that the company experienced substantial growth in its Microsoft 365 commercial products and cloud services, which increased by 11% year-over-year. A recent analyst note from

[00:06:42] Jeffries indicated the demand for artificial intelligence is trending higher than expected as Microsoft processed an increased number of artificial intelligence tokens. Microsoft's. Meanwhile, Google reported a 28% year-over-year jump in revenue for its artificial intelligence-focused cloud computing unit, totaling $12.3 billion. Alphabet, the parent company of Google, reported a 12% increase in revenue for the first quarter of 2025, and this growth was accompanied

[00:07:07] by a significant rise in net income, which reached $34.54 billion, up from $23.66 billion a year earlier. However, much of this increase was attributed to equity investments, rather than operational performance. Apple anticipates a $900 million impact from tariffs in the upcoming quarter, as revealed during its recent earning call led by CEO Tim Cook. Despite reporting $95.4 billion in

[00:07:33] revenue for the second quarter of 2025, the company faces uncertainties regarding the global tariff landscape that could affect future profits. In this quarter, Apple managed to grow its iPhone revenue by 2% compared to the same period last year while achieving an all-time record in services revenue of $26.6 billion. Cook emphasized the unpredictability of future tariff impacts, stating that the estimate of $900 million

[00:07:57] should not be used to project future quarters. Apple's chief financial officer noted that the outlook assumes current global tariff rates and policies remaining unchanged. As the company navigates it all, it continues to ramp up manufacturing in the U.S. to mitigate potential disruptions. While I'm talking earnings, a little bit of insight. A recent article highlights the significant connection between employee job satisfaction and company performance, suggesting that understanding

[00:08:25] this relationship can be revealed through earnings reports. Research from the Pew Research Center indicates that half of all U.S. workers report being extremely or very satisfied with their jobs, while an additional 38% say they are somewhat satisfied. The happy productive worker hypothesis suggests that content employees are more engaged and productive, creating a feedback loop that enhances both performance and overall job satisfaction. However, external factors such as personal issues and

[00:08:53] organizational culture can also impact employee sentiment. Companies that prioritize employee enjoyment can potentially see improved productivity and financial performance, with studies showing that firms listed among the best places to work outperform their peers by over 2% annually. Why do we care? The latest earnings reports from Microsoft, Amazon, Meta, Google, and Apple provide a revealing snapshot.

[00:09:17] AI-driven infrastructure investment remains aggressive, but with caveats. While these tech giants continue spending heavily on data centers, cloud services, and AI, they are doing so amid rising tariffs, uncertain economic conditions, and increased scrutiny on cost. The hyperscalers are still pouring money into the cloud and AI infrastructure space. Signals sustain demand for supporting services, migration, optimization, governments, and cost management.

[00:09:43] IT services firms can benefit from second-order effects, like clients spending more on cloud, especially Azure and AWS, or new tools and platforms clients will need help navigating and ongoing modernization to integrate AI capabilities into legacy systems. Meta, Amazon, and Apple all flagged tariffs as rising concerns. If trade conditions worsen, the infrastructure boom could cool off,

[00:10:07] and with it a slowdown in projects for services firms. Be wary of overcommitting to clients who rely heavily on physical infrastructure or imported hardware. We'll get to tariffs again next. So let's talk about the reporting on the impact of the tariffs. In the latest report on enterprise technology, companies are increasingly vulnerable to the disruptive effects of tariff policies, as well as market volatility influenced by cryptocurrency trends.

[00:10:35] Earnings reports from major players such as Google Cloud and ServiceNow showed differing levels of resilience. Google Cloud reported a revenue growth of 28%, while ServiceNow exceeded Wall Street estimates for both revenue and profit. In the last report, companies like IBM and Intel are facing significant challenges. IBM's stock dropped by 6.6% after acknowledging that its consulting contracts with the federal government were adversely affected by the current economic climate, while Intel issued a revenue forecast for the second quarter well below expectations.

[00:11:05] And some before reported on the small business impact. Small businesses are increasingly feeling the impact of the tariffs, prompting calls for relief from Capitol Hill and the business community. Senator Jerry Moran of Kansas is advocating for tariff exclusions specifically for small businesses, emphasizing that without these exclusions, their success and the American dream are at risk. Moran is engaged with the United States Trade Representative Jameson Greer, highlighting concerns for small manufacturers

[00:11:31] who rely on critical parts for their operations. Initially, the administration indicated there would be no exclusions, but recent comments suggest a shift in policy, with some exclusions now being considered. As the discussion continues, small businesses are looking for immediate support to navigate these current conditions. Why do we care? Tariffs are not background noise. They're actively redrawing the risk map for enterprise technology and small businesses alike. From major players like IBM and Intel to small manufacturers

[00:12:00] and SMB clients, the effects are rippling through technology spend, service demand, and even the structural viability of key client segments. This isn't just a trade story for IT service providers, it's an inflection point. Google Cloud and ServiceNow still posted strong results, but IBM and Intel stumble, citing shrinking consulting opportunities and weak forecasts. The difference? Cloud and SaaS players offer scalable, cost-effective solutions. Hardware heavy or long-term consulting

[00:12:28] engagements are taking the hit first. IT services firms that still focus on traditional infrastructure or slow-growth government consulting work are exposed. In SMB, cash flow is constrained and discretionary spend, like IT projects, is vulnerable. If you're servicing SMBs, expect delays, renegotiations, or cancellations, unless your offerings are positioned as essential, not optional. Tariff-driven uncertainty

[00:12:53] is accelerating the shift from CapEx to OpEx. Promote managed services, cloud licensing, and consumption-based infrastructure models that help clients flatten spend. And be aware, if tariff pressure continues without meaningful exclusions or relief, some small businesses will simply fail. The Global Technology Industry Association has appointed Dan Wensley as its new Chief Executive Officer.

[00:13:21] Dan Wensley brings a wealth of experience to the role, having previously held key positions at companies like ScalePad and Level Platforms, as well as founding MSP Partners before its sale to CompTIA. His appointment is seen as a strategic move for GTIA, which is looking to innovate and expand its service offerings. The association has been focusing on enhancing its capabilities to better serve IT service providers since its spinoff as a standalone organization from CompTIA following their acquisition.

[00:13:48] Why do we care? Wensley's track record isn't just long, it's directly tied to shaping the modern managed services space. From his work at Level Platforms, which was a foundational RMM player, to building MSP Partners, which became part of CompTIA, to helping ScalePad become a category-defining player in asset lifecycle management, Wensley has consistently been at the intersection of MSP evolution and vendor alignment. I'm also biased. Dan hired me for my first vendor role at Level Platforms.

[00:14:16] I released an editorial yesterday after the announcement with my vision of what GTIA could be. Answering that question will be key, and community or growth alone are not a vision. The fundamental question is this, what unique value does GTIA offer to the industry? Dan's background is heavily vendor-oriented. If GTIA becomes just another place for vendors to push

[00:14:44] messaging without elevating the voice and needs of IT service providers, it risks becoming a trade show with a mission statement rather than a true industry advocate. The legacy of vague positioning and diluted purpose lingers. It will take more than a high-profile CEO to build trust and relevance among smaller and mid-sized IT

[00:15:04] service firms. This is Wensley's challenge to deliver fast, tangible wins that proves GTIA matters. With every new breach and threat that I cover, it's clear that cybersecurity isn't a luxury anymore. It's a necessity. That's where Huntress comes in. Their fully managed cybersecurity platform is built

[00:15:28] for every kind of business, not just the 1%. Huntress seamlessly integrates their products and threat hunting team. Their EDR, ITDR, SIM, and security awareness training solutions are purposely built for their elite 24x7 security operations center to stop threats before anyone else even spots them. This potent combination of purpose-built cybersecurity and threat hunting expertise is one of the many reasons why GTIA users

[00:15:57] have voted Huntress the number one rated EDR for growing businesses. To see what people-powered cybersecurity looks like, visit Huntress.com slash MSB radio. Thanks for listening. Today's National Nurses Day, National Teachers Day, National Foster Care Day, and National Beverage Day. The Business of Tech is written and produced by me, Dave Sobel, under ethics guidelines posted

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