What fuels staffing’s growth, and how to cash in

The US staffing industry is projected to grow 6 percent in 2015, according to Staffing Industry Analysts’ latest forecast, with growth fueled by acceleration in the US economy and secular growth drivers. (A secular trend is an overarching, longer-term trend not dictated by the economic cycle.) This begs the following questions: What are these secular growth drivers? And how do we know they even exist? In this article, we provide some answers and suggest some action items for how staffing executives can capitalize on these trends.

Evidence for secular growth. The ratio of employment in the temporary help industry to total US payroll employment — the temp penetration rate — was at a record high of 2.10 percent in September, meaning slightly more than two jobs out of every 100 in the US economy are via staffing firms. For historical context, the ratio was 1.06 percent in 1990, and hit prior peaks of 2.03 percent in April 2000 and 1.95 percent in November 2005. The current record high ratio implies that agency temporary workers have never been more prevalent.

Secular growth in temporary staffing is also suggested by the share of new jobs added to the economy over the past year that came from the temporary staffing industry. During 2014, this ratio has been in the astonishing range of 8 percent to 10 percent. For historical context, the chart on the following page shows how this ratio has tracked following the last three recessions. Following the last recession and up to the present, the proportion of temporary jobs has not yet trended downward, whereas the prior two recoveries had already seen a downward trend.

Explanations. There are a number of possible causes for this secular growth. First, demand for temporary agency workers may be rising along with the broader trend of increased usage of a contingent workforce by large organizations. In Staffing Industry Analysts’ annual survey of staffing buyers, the average reported share of workforce that is contingent reached 18 percent in 2014, up from 12 percent in 2009.

Second, while data may not be conclusive on this point, there is reason to believe the expansion of VMS technology has made it easier and cheaper for organizations to use agency workers. The expanding use of VMS has been a clear trend, with 72 percent of buyers using a VMS in 2014, up from 14 percent in 2005, according to Staffing Industry Analysts’ buyer survey.

Third, there is evidence workers are more willing to accept and recommend temporary positions, resulting in a greater supply of talent. In Staffing Industry Analysts’ 2013 contingent worker survey, temporary workers rated their staffing agencies with a net promoter score of 45, meaning that a net 45 percent of workers would highly recommend their staffing firm to a colleague. To the extent that this high satisfaction rating may be an indication of changing attitudes and growing acceptance of temporary positions, such a supply-side trend could qualify as a secular driver of growth in the industry.

Ride the wave. Given the solid growth occurring in today’s staffing industry, how can your staffing firm best take advantage of it?

  1. Fine tune your company’s forecast. While the staffing industry is experiencing solid growth overall, demand trends vary widely based on skill segments and geography. For example, according to Staffing Industry Analysts’ US Geographic Opportunity Atlas, temporary staffing employment grew 24.1 percent in Delaware in 2013, but declined 5.3 percent in South Dakota. Similarly, while education staffing is forecast to grow 18 percent in 2015, only 2 percent expansion is projected for office/clerical staffing.
  2. Plan your headcount accordingly. In order to avoid being shorthanded when a wave of orders arises, make careful plans about the types of skills and geographies which you plan to staff in the coming year.
  3. Educate your customer. Now that you are armed with a better understanding of growth drivers in the staffing industry, you can better educate your clients. Such education may not only help your business, but your client may well find themselves glad they are keeping up with competitive trends in staffing.