Although its impacts can be felt around the world, the COVID-19 pandemic is hitting the United States especially hard. According to the Organisation for Economic Co-operation and Development, the U.S. is set to lose seven to eight years of economic growth as a result of the pandemic—a loss that can already be felt throughout the economy. This includes the staffing industry, where the outbreak has ended a decade of sustained growth.
Most segments anticipate big drops in revenue this and next year—with revenues in U.S. staffing set to decline by as much as 45% overall. These numbers depend on several scenarios based on the length and severity of the outbreak, but given the rapidly shifting nature of COVID-19, Staffing Industry Analysts (SIA) issued an update to its comprehensive twice yearly forecast on the U.S. staffing industry. Here’s Amzur’s analysis of their new report.
The Length of the Outbreak
Much depends on the length of the pandemic and how long it continues to affect U.S. businesses. SIA’s shortest recovery scenario, where the COVID-19 virus dissipates on its own and governments control of the outbreak via advances in testing, tracking, treatment, and/or prevention, did not come to pass in the U.S. Lockdown conditions were lifted early, causing a resurgence over the summer, and the economy never had a chance to return to normalcy.
Their second scenario outlined what would happen if the lockdown ended after a few months so the economy could gradually begin to recover during the second half of the year, aided by government stimulus packages. While lockdowns were lifted, the disease continued to spread and has resulted in nearly 200,000 American deaths at the time of this analysis. Economic impacts have also surpassed the moderate negative effects predicted in this model, which assumes the virus will not return significantly this winter.
That leaves the third scenario: a longer outbreak. In this scenario, lockdowns continue for significant stretches of 2020 as regions struggle to contain the virus and deal with its economic impacts, including higher unemployment and lower consumer spending. In this scenario, governments may eventually exhaust their ability to use monetary and fiscal policy to combat economic declines.
Each of these scenarios result in changes in revenue for specific segments within temporary staffing. But which segments will be hit the hardest?
According to SIA, the office and clerical staffing market experienced shrinkage last year, which aligns with declining job numbers caused by automation technology. However, some evidence suggests that these workers have been retrained to perform more complex, higher paying roles, so staffing firms may simply be focusing on higher skill positions.
As a result of this uncertainty, SIA forecasts a 25% decline in the office/clerical segment in 2020, though some office/clerical staffing firms have reported that clients in lockdown areas have allowed temporary workers to work from home, which could mitigate these effects.
SIA estimates that COVID-19 will result in a 25% decline in industrial revenue in 2020 despite increased hiring in areas such as online retail, grocery stores and food delivery, pharmacies and hardware stores, warehousing and logistics, and manufacturing related to healthcare supplies.
The financial impact on temporary engineering staffing is harder to assess, given the progressive spread and unpredictable duration of COVID-19, but the volatility of the pandemic has forced many engineering companies to recalibrate their hiring strategies, meaning SIA’s 2021 forecast is largely governed by the severity of the 2020 recession. The segment could grow or drop slightly depending on those outcomes.
The IT staffing market, on the other hand, was reaching all-time highs in 2019, but widespread economic disruption from COVID-19 led SIA to reduce its 2020 forecast from $33 billion to $27.8 billion, the biggest drop since 2009. Nonetheless, IT should be among the most resilient staffing segments thanks to a high capacity for remote work, preferences for a flexible workforce, and increasingly IT-based projects driving growth and profitability across industries.
Before the COVID-19 outbreak, U.S. healthcare staffing was mostly driven by secular growth in healthcare spending based on a range of factors, from an aging population to rising levels of chronic health conditions. Nonetheless, SIA projects 1% healthcare staffing industry revenue growth this year, as increased funding from various stimulus bills plus pandemic-based demand for doctors, nurses, and other clinicians will offset declines.
The life sciences segment, however, includes specialized roles in the pharmaceutical, biotechnology, and medtech industries, where market dynamics have favored companies with a defined niche. A lack of qualified candidates coupled with a preference for on-site contractors led SIA to predict a 25% decline in 2020 revenue; however, under a more severe scenario, the segment could experience a drop as significant as 40%.
SIA projects only a 15% revenue decline in staffing for finance and accounting due to COVID-19. Businesses will continue to need finance teams for tax preparation and other purposes, whereas lenders and government agencies may need additional staff to process loans and unemployment claims.
Before COVID-19, the relatively fast growth rate in marketing and creative staffing was due to the segment’s size and secular drivers such as digital transformation, high demand for digital marketing tech skills, and a limited supply of talent in areas like social media, data analytics, graphic design, content development, and more. This led SIA to predict a 20% drop in segment revenue this year followed by a 15% recovery in 2021.
The education segment consists primarily of the staffing of substitute teachers and teacher aides at districts that outsource this function to a specialist staffing agency. The segment experienced double-digit growth from 2013 to 2015, so, assuming the COVID-19 outbreak is temporary, the segment could generate continued growth, but it could also see a 20% revenue decline in 2020 with a 25% bounce back in 2021.
Direct hire refers to “permanent” placement where the staffing company’s fee is contingent upon placement, while retained search means the fee is not contingent upon placement.
SIA estimates that a significant U.S. recession could cause direct hire revenue to drop by 50% as the number of unemployed individuals soars and companies have greater incentive and ability to find and hire talent directly as the labor market shifts. Retained search could see a less severe but still significant 30% revenue drop with a 20% recovery in 2021.
What This Means for the U.S. Staffing Industry
The COVID-19 outbreak—and the resulting business disruptions—have resulted in a global recession that has ended a decade of growth in temporary staffing. SIA’s scenarios predict significant revenue declines this year in almost all segments, but the duration of the outbreak remains uncertain, meaning the possible consequences are also largely unknown.
Due to this uncertainty, it is critical for business leaders to plan for a full range of outcomes. Finding a reliable staffing partner can help see you through this time, providing the tools and flexibility you need to stay ahead of the recession and keep your growth on track. Reach out to Amzur today for more information on finding that partner for U.S.-based IT staffing.
Director of Digital Marketing
Bengi Lynch, is the lead content writer for IT Staffing at Amzur Technologies, Inc. She is the Director of Digital Marketing. She has close collaboration with recruiters, hiring managers, staffing managers, and other subject matter experts (SMEs) to gather information needed to write on trending topics.