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Temporary Staffing and COVID-19 — A Snapshot of Disequilibrium

06/04/2020 By

As we enter June, many of us are thinking about what lies ahead and how contingent workforce will be used in the COVID-19 “new normal” disequilibrium lasting through this year and most likely next year.

While the analysis below focuses on temporary staffing in the U.S., our scan of available data in the UK and EU showed us a very similar pattern. So most of the insights below can probably be extrapolated to that region.

Temporary staffing has been the largest category of contingent workforce that companies have spent their dollars on (knowingly, at least). In 2019, organizations in the U.S. spent over $150 billion on temporary staffing and on average engaged just under 3 million temporary workers each month.

Not surprisingly, COVID-19 closures resulted in massive cancellation of orders/requisitions. According to one source, Brightfield/TDX, orders/requisitions for new temp jobs were slashed by almost 100% from week 2 of February to week 1 of April (something which could seem like a nuking of the staffing industry).

But what has really happened in the past months, where are we now and where are we going to from here?

A bit of a crater

Impressive in both a negative and a positive sense, over just a brief span of two months, U.S. private and public sector organizations (according to Bureau of Labor Statistics (BLS) data, portrayed below) reduced their temporary jobs/workers from 2.94 million in February to 2.04 million for April (a reduction of 900,000 jobs/workers, or over 30%). Of that three-month reduction, 840,000 jobs/workers were shed in April.

On the one hand, it’s a spectacular crater; on the other hand, it’s an example of the staffing industry doing its job (albeit in reverse).

(click image to enlarge)

The plot of the American Staffing Association (ASA) Staffing Index for 2018, 2019 and 2020 provides a number of other insights.

It puts the extraordinary fall off in the context of the past two years of consistently robust staffing employment/business transacted. And it confirms the roughly 30% drop reflected in the BLS data (the ASA Index is based on a monthly survey of staffing suppliers).

At the same time, it throws into relief that the flip side of the 900,000 fewer temp jobs is the roughly 2 million temp jobs that organizations were (presumably) paying for. The implication here is that 70% of staffing volume remained steady in April.

Moreover, the ASA Index hit a low point for the week ending April 26 (which was the last week-over-week reduction and the start of four subsequent weeks of increases in the number of engagements). The Index rose to 62.2 for the week ending May 24 (an increase of nearly 4.5%).

We can speculate that the end of April was an inflection point. But we can’t be sure (since so many factors will come into play), and (even if it was) we have no idea of what the slope of the current growth curve will be.

This is where another dose of those order/requisition numbers (for May) would be useful to validate an expansion. That said, these are early days and the social, political and economic environment is complex and uncertain, so what will happen in the coming weeks is unclear.

Looking ahead

To the extent that we can assume some kind of longer-term recovery trend, what can we expect?

No one has a crystal ball, and I haven’t seen many forecasts floating around for temporary staffing business in the coming year and beyond.

I did, however, find a forecast produced by Statista that forecasts that U.S. staffing and recruiting revenues would decrease from $151.8 billion in 2019 to $119.4 billion in 2020 (a drop of over 20%). Statista also projects that revenues will increase to $136.4 billion in 2021 (a bit more than staffing revenues in 2015), but considerably more than staffing revenues in 2012 (which were $114.1 billion).

In this scenario, there is not a snap-back to 2018 and 2019 levels, but it is a fairly rapid increase being projected (it 5  years for revenues to rise from $119.5 billion in 2013 to $134.8 billion in 2018).

At any rate, it’s not clear how much weight to place on Statista’s forecast, though it’s likely that the number of temporary jobs will increase gradually (everything else being equal). And ultimately, it’s about the appetite of organizations for permanent workers, temporaries, other contingents, traditional services, online platforms and AI/automation.

How different organizations will face off against these choices will have to play out in the months and years ahead. And many questions now arise about how the staffing industry will respond to these challenges.

Andrew Karpie is Spend Matters’ Director of Labor and Services Procurement Research.