Since our last newsletter, we’ve heard rumblings of contraction in the IT market, with some companies reporting tech layoffs or hiring freezes. In the SIA | Bullhorn Staffing Indicator for the week ended May 14, the Professional Staffing Index (of which IT is a part) is off from its first-quarter highs, but is still up 12% year over year. Despite headwinds of rising inflation and interest rates, supply chain disruptions, effects from the war in Ukraine and lockdowns in China, IT staffing thus far is resilient.
In the May Pulse, IT staffing revenue was up a median 19% year over year. A net 66% of firms were reporting positive revenue growth, down from a staggering 88% in the March survey. But trends remain positive: a net 55% of companies expects an increase in new orders over the next six months.
Wage inflation has been a hot topic in recent months, and a net 63% of companies expect a (further) increasing trend in bill rates over the next six months. Furthermore, we asked about the impact of wage inflation so far in 2022 as an extra question in the survey this month. Nine IT staffing companies provided open-ended responses to this question, including:
- “Pay rates are up 13% year over year, but bill rates are up 14% year over year.”
- “It is becoming challenging to meet pay rate expectations of IT contractors.”
- “Candidates being more demanding of higher pay. We control the pay rate and the client just provides the bill rate. Our margin has been squeezed on some positions because the competition to pay higher wages to the candidate has become more competitive.”
IT staffing companies are struggling to keep up with the elevated and continually rising pay rates, and time will tell whether talent lose some of their leverage and bill/pay rates pull back.
As for projecting how things play out the rest of this year and beyond, let’s turn to our US Staffing Industry Forecast: May 2022 Update. We estimate the size of the IT staffing market was $34.7 billion at the end of 2021. The key phrase in 2022 is “digital transformation,” and companies in the first and second quarter of the year have been reaching far and wide to meet the massive demand for roles fulfilling such a need. While large IT staffing companies reported 25%-plus growth in the first quarter, we expect the full 2022 figure to trend downward as 2022 progresses due to year-over-year comparisons getting tougher in the second half, as well as economic headwinds affecting all staffing segments. Still, we project 12% growth in 2022 to move the market up to $38.8 billion in size.
For an up-to-date view on the year’s staffing growth and trends, participate in the next Pulse at the beginning of July. Keep an eye out for the survey, or access it via our Surveys page.
