2024 Outlook for the Staffing Industry – It’s Time To Update Your Strategic Plan
- A brief overview of survey results
- Key insights from the survey
- The Expected Continued Retirement of Baby Boomers
- Growth of Gig and Freelance Work
- The Demand for Flexible Work Schedules
- The Continued Interest in Remote/Hybrid Work Environments
- Expected Shifts in the Economic Environment
- Alternative lending solutions
- Key Takeaways
Will the staffing industry witness growth, decline, or stagnation as we enter the new year?
The outlook for the staffing industry in 2024 is uncertain, with no consensus among experts. Nevertheless, if there is a leaning, it is towards sustained growth, though not as robust as in previous years.
Despite initial predictions of a 3.2% decline YoY in staffing revenue this past year, the industry has proven more resilient than expected. According to the latest ASA survey, staffing agencies anticipate a 2.1% revenue increase by year-end, fostering this cautious optimism for the industry in 2024.
Despite high inflation and rising interest rates, the unexpected strength of consumer spending marks the current economic uncertainty. How sustainable will this strength be against rising consumer debt levels and depleted household savings? In the face of these changing conditions, staffing agencies should reassess their 2024 objectives and strategies.
Although it is impossible to predict the upcoming year with any degree of certainty, a comprehensive overview of labor market trends, along with current and projected economic indicators, should help inform your strategic planning for the new year.
This article provides a brief overview of the data and analysis provided in the 2023 ASA Staffing Industry Playbook. Keep reading for a summary of the data-driven information and insights presented in the report to help guide a reassessment of your 2024 strategic plans.
A brief overview of survey results
The ASA Staffing Industry Playbook survey is packed with research data to assist you in understanding where the staffing industry is headed and how to capitalize on areas of opportunity. Before delving into some of the specific details reported in the survey, here is a brief overview of the content with links to the relevant survey pages:
- The economy is more resilient than anticipated, and the job market remains strong.
- GDP growth continues despite headwinds.
- Labor demand may be lower than in 2022, but businesses are still hiring, and opportunities for staffing agencies remain.
- With 6 job openings for every unemployed person, talent shortages will remain in the future.
- The nation’s workforce participation is rising but remains below pre-pandemic levels.
- Temporary and contract employment trail the record highs of 2022 levels but remains above all other previous years.
- 2023 average weekly staffing employment trails 2022 levels.
- Staffing penetration rate (the percentage of temporary employment to total nonfarm workforce) dipped to 1.92% from the 2022 all-time high of 2.08%.
- Staffing and recruiting sales increased7% to $186 billion in 2022.
- GDP is projected to grow slowly in coming years:0% (2023), 1.3% (2024), 2.1% (2015)
- Staffing agencies anticipate 2023 revenue growth to exceed 2022 by 2.1%.
- Although health care and social assistance remain dominant, professional and business services are projected to overtake as the largest sectors for creating new jobs in the coming years.
- Overwork/burnout and poor career growth are key reasons for leaving jobs.
- Staffing employee turnover edged up in 2022; tenure edged down.
- Despite the rapid growth of hybrid and remote work, 70% of job applicants prefer in-person interviews.
- Candidates see advantages to in-office work, yet many still desire flexibility.
- 58% of adults are likely to seek a 2nd job for supplementary income.
Key insights from the survey
While an overview of data provides a big-picture view, understanding the trends and how they affect the industry’s future is essential to gaining real value from the survey.
With that in mind, let’s dive in with a closer look at the significant issues expected to influence the labor market in 2024:
- Ongoing retirement of baby boomers.
- An emerging trend towards gig and freelance work.
- Demand for flexible work schedules.
- Continued interest in remote/hybrid work environments.
The Expected Continued Retirement of Baby Boomers
Baby boomers born between 1946 and 1964 are becoming eligible for retirement. According to projections by the U.S. Census Bureau, about 4.4 million boomers will turn 65 in 2024. And by 2030, all boomers will be at least 65 years old.
The large-scale retirement of baby boomers is expected to considerably impact the labor market in the following ways:
- Lost knowledge/experience: As boomers retire, the labor pool of industry-relevant knowledge and experience is anticipated to be depleted. Because these valuable skills are often difficult to replace, 2024 is expected to see the talent gap widen. As a result, staffing agencies must innovate in talent sourcing and acquisition.
- Increased demand for new hires: There are 1.6 job openings for every unemployed person in the United States. The retirement of baby boomers is expected to lead to further labor shortages, keeping the labor market highly competitive.
- Reduced bottom lines: Expectedly, with the significant loss of experience and skill, companies will lose their competitive edge and incur higher production costs. While this connection may not be direct, ongoing productivity costs will likely rise.
Growth of Gig and Freelance Work
Without a doubt, American workers are increasingly joining the gig economy. Whether driven by ambitions of being their own boss, a desire to increase earning potential, or a need for job flexibility, more and more workers will continue to look for gig or freelance work instead of traditional W-2 employment. However, another factor affecting the gig economy’s growth is the economic pinch felt by American workers. 58% of adults are considering seeking a second job for supplementary income.
Awareness of workers’ economic concerns will help staffing agencies fill vacant positions. As workers feel the pinch from inflation and layoffs, understanding why workers seek freelance or side gigs will help start meaningful dialogues.
The Demand for Flexible Work Schedules
Workers continue to prioritize flexible work schedules over increased pay.
According to an ASA Workforce Monitor survey, 44% of workers are willing to accept lower pay for increased job flexibility. In the competitive job market, retaining talent may hinge more on flexible work options than higher salaries. Staffing agencies must be ready to guide clients on integrating flexibility into various traditional and remote roles as the demand for such conditions continues to rise.
The Continued Interest in Remote/Hybrid Work Environments
While the traditional office is far from obsolete, remote work has caused an unprecedented shift in the labor market. According to a Pew Research Center poll, 35% of fully remote-capable employees consistently worked from home, and 41% favored a hybrid work schedule. As hybrid work models are expected to dominate the labor market, staffing agencies must counsel clients through adaptation to avoid challenges in attracting and retaining talent.
Expected Shifts in the Economic Environment
In addition to understanding labor market changes, staffing agencies should stay informed about shifts in the overall economic landscape. The good news is the U.S. economy might steer clear of a recession in 2024. However, the challenging news is that anticipated economic growth is expected to be only moderate at best in the coming years.
According to a Wall Street Journal forecast, the economy is projected to experience a modest growth of 1.3% in 2024. On the brighter side, inflation, which soared to a 40-year high of 9.1% in June 2022, slowed in October 2023 to 3.2%.
While experts are not expecting the Federal Reserve to increase interest rates further, this remains to be seen. Despite potential increases, the current high-interest rates and economic conditions will persist, limiting traditional lending options. Staffing agencies seeking business financing must explore alternative lending solutions to sustain operations, maintain financial health, and support growth initiatives.
Alternative lending solutions
As one door closes, another one opens. While banks and other traditional lenders contract the credit market, alternative lenders continue to increase access to capital. Alternative lending solutions, such as payroll funding options, will remain well-positioned to help staffing agencies meet short-term cash flow requirements and long-term sustainability. Staffing firms supported by the flexible funding options provided by alternative lenders have the competitive advantage of agility to respond quickly to new business opportunities. For maximum efficiency, be sure to work with an experienced lender who knows how your business works and has expertise within the staffing industry.
The nation’s economic future is uncertain. Due to stronger-than-expected indicators, analysts are optimistic about avoiding a recession in 2024. However, the remarkable strength in consumer spending that boosted GDP growth in the past two quarters is anticipated to decline in the coming year. Inflation, elevated interest rates, decreasing household savings, and growing consumer debt will take their toll and impact the economic landscape. The outlook for GDP growth in the next few years is projected to be low to moderate at best.
As companies across all industries face ongoing challenges, including fiscal constraints and labor shortages, staffing agencies must be prepared to react with agility and cost efficiencies to outperform the competition when new business opportunities arise.
The most effective approach to uncertainty is preparation. Successful staffing agencies will have a clear view of industry trends and conditions and a viable business plan to maximize market share.
Now is the time for staffing agencies to reassess strategic plans as new economic expectations develop for 2024.
- The industry’s outlook for 2024 is uncertain, with most experts anticipating sustained GDP growth, though it will be low to moderate at best.
- Staffing agencies must be prepared to react with agility and cost-efficiencies to outperform the competition when new business opportunities arise.
- A comprehensive overview of labor market trends, along with current and projected economic indicators will help guide a reassessment of strategic planning for the new year. The best approach to uncertainty is preparation. Now is the time for staffing agencies to reassess strategic plans as new economic expectations develop for 2024.
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