Course corrections that follow major upheavals and dramatic shifts, such as the COVID-19 pandemic, are seldom quick or clean. The struggle to attain a new normal in the wake of health, social, geopolitical, and economic strains has certainly made for a turbulent 2023. With staffing revenues falling — most noticeably in healthcare after a boom period — and with the year drawing to a close, now is a good time to examine the causes and the potential opportunities we can seize as 2024 dawns.

Temporary Staffing Revenues Are Down

According to the latest Staffing Industry Analysts’ (SIA) Pulse report, temporary staffing revenue fell a median of 10% year-over-year in October among staffing firms taking part in the survey. The decline is due in part to a slowdown in economic growth and a decrease in demand for temporary workers.

“The decrease was greater than the 7% decline recorded in the previous Pulse report covering August,” SIA noted. “The new report also asked staffing firms about their biggest challenge. The top answer was a slowdown in new orders/requisitions, cited by 40%. Difficulty attracting talent was cited by 14%.”

If we look at the data by skill set, we get a clearer picture of the current situation.

• Travel nursing revenue fell by a median 21% year over year in October
• Per diem nursing decreased by 14%
• IT staffing revenue fell 4% year over year
• Industrial staffing revenue dropped 2%
• Growth remained flat in engineering, finance/accounting, legal and office/clerical
• Direct hire revenue was also flat year over year

“One bright spot was locum tenens,” SIA pointed out, “where revenue rose by a median 20% year over year in October.”

Reasons for the Staffing Revenue Declines

The 10% year-over-year decline in temporary staffing revenue marks a significant shift from the robust growth seen in recent years. This downturn can be attributed to several factors.

• Slowdown in Economic Growth: The overall economic climate has been showing signs of moderation, with factors like rising interest rates and inflation impacting business activity. This slowdown has led companies to be more cautious in their hiring practices, reducing their reliance on temporary workers.
• Decrease in Demand for Temporary Workers: As companies become more conservative in their hiring, they are prioritizing permanent placements over temporary staffing solutions. This shift in preference is contributing to the decline in demand for temporary workers.
• Skill Mismatch: The skills required for temporary positions may not always align with the available pool of talent. This mismatch can make it difficult for staffing companies to find qualified temporary workers, further dampening demand. 

Some of these issues, such as economic slowing and fluctuating demand for contingent talent, follow similar historic cycles. Their paths will alter as market conditions change. Other factors are more nebulous and potentially longer lasting. Consider the skills gap.

As we wrote earlier this month, the acceleration of AI and digitization in the workplace will reshape nearly a quarter of all jobs over the next five years, according to recent global research. In today's rapidly evolving business landscape, the demand for skilled professionals is higher than ever before. This leaves businesses facing a significant challenge: the need for skills is outstripping the supply. To remain competitive and innovative, organizations must prioritize hiring individuals who possess a unique set of skills. 

​​Waning Demand for Temporary Workers

The decline in demand for temporary workers is evident across various industries, including manufacturing, healthcare, and office/clerical. This trend is particularly noticeable in larger companies, which are more likely to have the resources to invest in permanent staffing. There are a few key factors influencing the waning demand for temporary workers.

• Economic Uncertainty: Companies are hesitant to commit to long-term staffing plans due to the uncertain economic outlook. This uncertainty is leading them to favor temporary workers for short-term projects or to fill temporary gaps in their workforce.
• Focus on Retention: As the labor market remains tight, companies are prioritizing retaining their existing employees. This focus on retention is reducing the need for temporary workers to fill vacancies.
• Automation and Technology: Automation and technological advancements are streamlining tasks and processes, reducing the reliance on manual labor and, consequently, the demand for temporary workers.

Healthcare 

The demand for travel healthcare positions demonstrated a more significant decline in recent years due to a combination of circumstances.

• Slowdown in COVID-19 Cases: The initial surge in COVID-19 cases during the pandemic led to a surge in demand for travel nurses and other healthcare professionals to address staffing shortages in hospitals and healthcare facilities. However, as the pandemic has subsided, so has the demand for travel healthcare workers.
• Focus on Internal Hospital Staffing: Hospitals across the country have taken steps to improve their staffing levels and reduce their reliance on travel healthcare workers. This has been achieved by hiring more full-time nurses and other healthcare professionals, as well as by expanding their use of overtime and other staffing strategies.
• Increased Competition for Travel Nurses: The supply of travel nurses has increased in recent years, as more people have been drawn to the high wages and flexible working conditions associated with these jobs. This increased competition has put downward pressure on travel nurse pay, making it less attractive for some nurses to take these positions.
• Hospitals Shifting to Permanent Staffing: Hospitals are increasingly shifting to permanent staffing solutions instead of relying on travel healthcare workers. This is because they often find it more cost-effective and efficient to have a stable workforce of full-time employees.
• Focus on Retention: Hospitals are also putting more emphasis on retaining their existing healthcare workers, offering them higher wages, better benefits, and more opportunities for career advancement. This makes it less likely that nurses will leave their current jobs to take travel assignments.

There are, however, still potential opportunities for travel nurses in certain areas of the country and in specific specialties. And additional factors could impact the demand for travel healthcare positions in the future.

• The emergence of new healthcare technologies and treatments
• Changes in healthcare policy
• The overall state of the economy

Coming Areas of Growth

Despite the lackluster outcomes of 2023, the outlook for 2024 does provide some solid indicators of growth opportunities to be captured.

• IT and STEM Roles: The demand for IT professionals is expected to continue to grow in 2024, as businesses increasingly rely on technology to operate. This will create opportunities for staffing firms that specialize in placing IT professionals. And as we discussed recently, the acceleration of AI, life sciences, and digitization in the workplace are contributing to a boom in STEM positions across new markets in the country, along with increasing pressure to recruit talent with the necessary skills. 
• Healthcare Staffing: The demand for healthcare professionals is also expected to grow in 2024, as the population ages and the need for healthcare services increases. This will create opportunities for staffing firms that specialize in placing healthcare professionals, yet perhaps with an emphasis on per diem and locum tenens roles over travelers.
• Temporary Staffing: The demand for temporary staffing is expected to remain steady in 2024, as businesses continue to use temporary workers to fill short-term staffing needs.

Key Staffing Trends for 2024

Overall, the staffing industry is expected to grow by 2.4% in 2024, to reach an industry value of $216.9 billion. However, this growth will be uneven, with some areas of the industry growing faster than others. Here are some of the key trends that will impact the staffing industry in 2024.

• The Expanding Digital Economy: The digital economy is creating new job opportunities and new challenges for the staffing industry. Staffing firms will need to adapt to these changes by investing in technology and developing new skills in order to meet the needs of their clients.
• The Changing Nature of Work: The nature of work is changing rapidly, with more and more people working remotely or in non-traditional employment arrangements. Staffing firms will need to be flexible and adaptable in order to meet the needs of these workers.
• The Aging Workforce: The population is aging, which is creating a shortage of skilled labor. Staffing firms will need to focus on recruiting and retaining older workers.
• The Rise of Advanced Automation: Automation is replacing many manual labor jobs, which is creating challenges for the staffing industry. Staffing firms will need to focus on placing workers in jobs that are not susceptible to automation.

Strategies for Staffing Providers to Help Clients

Staffing companies can take proactive steps to improve their situation, adapt to the changing market dynamics, and to help the businesses they support reach higher levels of performance and productivity in the new year.

• Focus on Specialization: Staffing companies can differentiate themselves by specializing in specific industries or job functions. This specialization can help them build expertise and attract clients seeking specialized talent.
• Invest in Technology: Embracing technology can enhance efficiency and improve service offerings. Staffing companies can utilize applicant tracking systems (ATS), artificial intelligence (AI), and other tools to streamline recruitment and placement processes.
• Expand Talent Pool: Staffing providers should actively expand their talent pools by targeting diverse candidate groups and nurturing relationships with educational institutions and professional organizations.
• Emphasize Employee Development: Investing in employee training and development can enhance the skills and qualifications of temporary workers, making them more attractive to clients.
• Build Strong Client Relationships: Cultivating strong relationships with clients can lead to repeat business and referrals. Staffing suppliers should prioritize understanding client needs and providing tailored staffing solutions.

Despite the challenges we’ve endured throughout 2023, there are also positive trends coming that will support the staffing industry in 2024. The economy is expected to grow, and businesses will need to continue hiring workers. The demand for IT and healthcare professionals is expected to remain strong. And the staffing industry is well-positioned to adapt to the changing nature of work.

‍Photo by Markus Winkler on Unsplash