Demand for digital transformation projects has persisted longer than expected, but the IT staffing market is ever so slightly showing signs of returning to normal.
In the September Pulse Survey, IT temporary staffing revenue was up a median 13% year over year, down from 20% in the previous survey. The deceleration across staffing segments was expected as second-half comparisons become more difficult and economic headwinds continue to linger. Interestingly, however, while a net 26% of IT staffing companies saw an increase in new orders over the last three months, a net 50% expect an increasing trend in the next six months.
In the Pulse, we asked about the greatest challenges that staffing firms were facing. Eight of the 20 IT staffing respondents that provided an open-ended response pointed to recruiting difficulty, three companies referred to candidate no-shows/turnover/unwillingness to work, and three companies mentioned economic weakness.
One response referred to candidates as still being in the drivers’ seat:
“It is still a candidate driven market where the candidates have plenty of opportunities which can make it challenging to deliver talent to our clients.”
Another response mentioned the expectations on remote work from candidates: “Most of our candidates are still expecting some remote work and are not willing to be in the office more than three days a week, primarily in the IT sector. ... The cost of inflation is also continuing to be in the conversation when negotiating rates.”
How long this market will continue is up for debate. But below is the sales/recruiting difficulty in IT temporary staffing since we began tracking such data in 2014. In the last few months, recruiting difficulty has come down from its historical highs, and the gap between recruiting and sales difficulty has shrunk. This could be an indicator that the record tight labor market is loosening.
Click on chart to enlarge
We take a loosening labor market into account in our latest US Staffing Industry Forecast, where we estimate 17% revenue growth in IT staffing in 2021 and project 16% growth in 2022 and 8% in 2023. Strong demand for DevOps, software engineer, cloud architect, product and project manager, and cybersecurity positions — each with higher-than-average bill rates, in an environment of general wage inflation — has helped spur strong IT revenue growth. Some of this demand could represent a longer-term shift to more skilled positions.
There is not yet evidence of a strong drop in demand in IT staffing, but in late 2022/early 2023, a slow return to pre-Covid levels of demand is expected as the tightness in the labor market is alleviated.
To see October IT staffing trends, be sure to participate in the November Pulse; keep an eye out for the invitation at the beginning of the month or visit our Surveys page.
