IT staffing growth has moderated to start the year.

Per the March 2023 Pulse Survey, IT staffing revenue was up 4% year over year on a median basis in February after a 9% increase in December. However, on an aggregate basis, revenue was down 4% year over year, meaning that on the whole, large companies participating in the survey fared worse than smaller companies.

The net percent of IT staffing firms reporting positive year-over-year revenue growth was 20%, though this is down from 44% in December and, looking further back, 88% in February 2022. Furthermore, the survey showed a net decrease in IT staffing new orders of 24% over the last three months, signifying a clear slowdown compared to the record new order levels seen in 2021 and 2022. And bill rate increases have decelerated from their record-high levels in mid-2022, pulling back down to their pre-pandemic levels.

This evident slowdown in trends can be seen in the charts below.

In the March survey, we also looked at the extent of internal staff and temporary worker layoffs across staffing segments as well as cost reduction measures taken at firms. What we saw in IT is no surprise: 42% of IT staffing respondents reported their companies had laid off temporary staff on assignment at the request of clients since the fourth quarter. However, most of these layoffs were of the smaller variety; 28% reported layoffs of 1% to 5% of temporary staff, 8% reported 6% to 10% of workers being laid off, while the remaining 6% of respondents reported larger layoffs.

IT staffing layoff figures were roughly in line with other segments. For perspective, 67% of industrial staffing firms reported temporary staff layoffs, as did 37% of office/clerical staffing firms and 21% of travel nurse staffing firms.

Meanwhile, 22% of IT staffing respondents reported their companies had laid off internal staff since the fourth quarter (lower than the 27% for all staffing respondents).

As for cost reduction measures, 43% of IT staffing firms delayed/pushed hiring plans out a few months/quarters, and 21% implemented a hiring freeze. Forty-six percent of IT staffing firms reported having taken other specific measures, and eight of these firms shared those measures. Three of the eight responses referred to reducing travel and event expenses amongst their internal staff.       

From these trends, it is clear that firms are taking a more cautious approach in the first quarter of this year. That doesn’t mean demand is dwindling, though. In Kforce Inc.’s most recent earnings call, the company indeed noted softness in demand to start the year and expects first-quarter revenue to grow in the low-mid single digits percentagewise. However, the company goes on to say that cloud, digital, data analytics, UI/UX and product and project management demand has remained strong, and expects such initiatives to be pursued regardless of what happens in the economy.

And as reflected in the Pulse Survey, optimism remains for the next two quarters; a net 27% of firms expect a positive trend in new orders over the next six months.

We take all of this into consideration in our just-published US Staffing Industry Forecast: April 2023 Update, where we project 5% growth in IT staffing in 2023, followed by 7% growth next year.

To keep up to date on IT staffing trends, participate in our next Pulse in May. Visit our surveys page for more info.