Marchon Partners Blog Staffing Industry Outlook for 2024

According to the Bureau of Labor Statistics (BLS), over 353,000 jobs were added in January 2024. This increase exceeded the Dow Jones expectations, which had a projection of 185,000 jobs. With the current unemployment rate remaining at 3.7%, and hourly wages increasing an average of 0.6%, this job growth has benefited both the labor market and the staffing industry. According to BLS, most new hires were added to these sectors:

Private Education and Health Services - 112,000 jobs 

Professional and Business Services - 74,000 jobs 

Retail Trade - 45,000 jobs 

Government - 36,000 jobs

Manufacturing - 23,000 jobs

Positive indicators of economic growth

In addition to new jobs being added, other measurements also help determine economic growth. Such as the consumer price index (CPI) which calculates the average prices of goods and services each month and then is reported by the BLS. The CPI is used to monitor inflation and also by the federal government to determine tax brackets and cost-of-living increases for Social Security programs. On average, the CPI will rise between 1% to 4% per year. Other indicators of economic growth include:

• Low Unemployment -  When the unemployment rate is low, ideally between 3% to 5%, this usually indicates a healthier economy and more job opportunities. In contrast, when unemployment is high, less jobs are available and pay raises are typically reduced or eliminated. This can often impact the purchasing power for employees.
• Gross Domestic Product (GDP) - The GDP is a country’s total market value of all goods and services produced within a year. Typically a 2% to 3% GDP indicates a growing economy that isn’t accelerating too fast. Usually, if the economy stays over 4% for too long, it’s unable to keep up with consumer and business demands.
• Inflation Stability - When inflation increases too fast, it often outpaces earnings. Generally, the Federal Reserve prefers inflation to remain at 2% for economic stability. However, too little inflation can cause deflation, which can lead to a potential recession. This usually occurs when consumers delay purchases as prices are consistently dropping.
• Wage Increases - As businesses are able to produce and sell more goods and services, they often also have the ability to increase wages to hire the best talent. According to Indeed, the average raise is typically between 3% to 5% per year. The final amount will generally be determined by business demands and job performance.

Upcoming opportunities for staffing companies

Job growth and other positive factors in the economy indicates the staffing industry should be poised for success, especially in the following areas:

Growth - According to Staffing Industry Analysts (SIA), worldwide, the staffing industry is estimated to reach $665 billion in 2024. Also, SIA estimates a 3% increase for the U.S. staffing industry, which is projected to be $207.2 billion in 2024. 

Hiring - Robert Half’s State of U.S. Hiring Survey, found 57% of respondents said they planned to hire new positions during the first half of 2024. Whereas, 39% of the participants indicated they would be filling positions that were already vacated. While the strategy for 67% of all respondents said they were expecting to hire contract workers.

Skills Gap - Hiring Managers (90%) who responded to the survey said they had difficulty finding and hiring skilled professionals. This provides an opportunity for staffing agencies to partner with businesses to train potential candidates. Some examples of these training options include:

Apprenticeships - digital media, project management, and educational support
Technical Certifications - Certified Scrum Master and AWS Certified Developer 
Personal Development - soft skills including management, leadership, and communication

Negative indicators that could impact staffing agencies in the future

While growth is projected for 2024, the staffing industry also may face some challenges in the future. Some of these concerns may include:

Wage Inflation - When a company increases wages to retain their workforce, they often will also need to increase the cost of their goods and services in order to maintain the same profitability. However, if the initial raise doesn’t offer enough purchasing power for employees, then an additional raise would be necessary. Every time the employer increases an employee’s wages and then also increases costs, this repeated pattern can cause wage inflation.

Artificial Intelligence - As the use of artificial intelligence (AI) progresses, there are concerns about how AI technology analyzes data that can lead to unintentional bias when hiring candidates. The Equal Employment Opportunity Commission (EEOC) started filing lawsuits against staffing agencies in 2022 for violating discrimination laws. In one example, women candidates who were over the age of 55 and men who were over 60 were automatically rejected by the AI algorithm.

Job Automation - Jobs becoming automated is typically a concern for both employees and staffing agencies who worry about future job security. Most often, this automation is used for repetitive tasks. Effectively managing this transition can create new training and job opportunities related to the development of AI, and can lead to higher salaries for displaced workers.