Why Did Temporary Work Decline Significantly in 2023

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On March 27, 2024, Staffing Industry Analysts (SIA) reported during their Executive Forum in Las Vegas, in a keynote address by their chief analyst Barry Asin, that staffing industry revenue was down 15% during 2023.

He also noted that the industry usually tracks well with overall GDP growth yet with GDP up overall, the staffing industry, at minus 15%, was obviously an outlier last year.

Although this single-year decline is not a trend, SIA forecasts that the staffing industry will continue to decline in 2024 but at a much lower percentage, i.e., 3% annually.

In attempting to explain why the 15% drop in staffing revenue, Mr. Ansin suggested four reasons. One of the reasons given was simply stated as “Disruption from the Pandemic continues”. I believe that reason alone actually includes the other three and may still not be sufficient to account for a 15% decline because there is unmentioned additional information that had a role in contributing to it.

It is hard to believe that we are only two years out from the near height of the Pandemic. Less than 2 years ago (June 2022) we were looking at the rapid rise in the Omicron subvariants (BA,4 and BA,5) of Covid-19 and the CDC was ordering updates to vaccine boosters to cover them.

Pandemic effects on the labor Market

We are still feeling the medical and social effects of Covid-19 and nowhere are these more evident than in the labor market. We all remember the millions of early retirements in 2021-22. This was fueled not only by pandemic layoffs and new dangers in the workplace for 50+ age workers, but also the enablement of retirements by large increases in the stock market fueled by pandemic related government spending unemployment increases, stimulus checks, (thus 401K increases) and increases in home prices (thus increased home equity).

This retirement “boom” continued into 2023 and is expected to continue into 2024 and beyond. The Society for Human Resource Management (SHRM) recently reported (Feb 25, 2024) that “An Unanticipated Retirement Wave is Happening Right Now in the U.S.. They cited Bloomberg reports for an estimate that there are currently roughly 2.7 million more retirements than predicted.

In addition to the reasons for early retirement we have cited above, this SHRM article added that employee “Burnout” was a very significant factor in many decisions to retire early.

As if the above situation were not enough, the immediate future is also problematic for the labor market. Although this cannot be included in the reasons for the 2023 decline, CNBC reported that Baby Boomers will be eligible for full Social Security retirement benefits beginning this year (2024). This translates into 11,200 Americans becoming 65 every day from 2024 through 2027!

In addition to the early retirements that were impacted by Covid, simply quitting work was another that greatly increased during that Pandemic period. Many women in vulnerable industries like hospitality, childcare, and other jobs that require in-person contact, quit. Women working from home got used to being with their children more and having a more flexible working schedule, also quit jobs when they were called back to the office. The lack of quality child-care and its cost also added to their decisions to quit.

Pandemic Ultimate Results

Massive early retirements and millions quitting jobs, directly and in-directly related to Covid, obviously created a very tight labor market. This “disruption from the Pandemic” has not only caused the “tight labor market” but that labor market has also contributed to other issues more directly related to the staffing industry.

For example, although there are several reasons for choosing a temp job, two of the major ones are when searching for a permanent job, to have a temporary job and/or to turn a temporary job into a permanent one (Temp to Perm). Many of those would-be temp workers are now employed in permanent jobs and therefore unavailable to the temp industry.

Also, when the labor market is very tight, employers may choose to have more permanent jobs to ensure they have sufficient labor on hand. So, they have less need to hire temps. What Barry Asin calls “labor hoarding” may be another name for this. He adds that there is “overall less chum in the labor market”. (my emphasis) Not sure what he meant by that latter phrase.

Although not mentioned by Asin, “warehousing” has been a high performer for staffing companies in recent years with a peak year in 2022. Sobel Shipping reported at the end of January that there was a record high of 63 mega leases signed in 2022, that dropped to 43 in 2023.  That could represent a lot of Temp jobs.

What to do?

I am not a strong believer in the advice that “When the going gets tough, the tough get going”. In fact, I tend to go in another direction. Relax. If business is slower in 2024, (3% decline is forecast) get some of those jobs done that were put off when things were too busy.

The golden business rule has always been to focus on your existing clients and serve them well. A lot of new business has always come from existing clients as well as from their recommendations to others.  Excellence is always welcome.

Staffing is a personal/personnel business leveraged with technology, not a technology company leveraged by people. In the last couple of years many businesses have over leveraged technology to the point that increasingly redundant technology is just the opposite of excellence.

Did you ever get a “customer survey” on how well you liked the product before it ever got out of the box? Clients know that the instant, robotic, “client satisfaction survey” when a service has hardly begun, is just an irritating attempt at being “on top of the latest technology”.

A good rule might be to never let technology get in the way of personal relationships with employees (core and contract) and certainly clients.

Especially coming from a “not so good” year (2023), it may be important to keep core staff relaxed. Business is usually most productive when working with a happy and confident boss who respects and appreciates their staff. Clients get a good feel for how people are treated in any organization every time they have contact by phone or in-person; “They read it off them”.

Finally, well managed staffing companies should be able to easily beat the SIA industry revenue forecast of a minus 3% for 2024.

Have a great year and, as always, stay safe and continue to pray for peace in Ukraine and Russia, Israel, and Gaza.