One topic of conversation at our recent Executive Forum, particularly in the industrial staffing roundtable discussions, was a recent slowdown for industrial staffing firms. In this article, I take a moment to contextualize and discuss this slowdown — and highlight where opportunities may be found within the industrial staffing segment.
Recent financial updates and investor calls from publicly traded companies active in the industrial staffing space corroborate last week’s discussions. For example, TrueBlue Inc. (NYSE: TBI) reported a 10% year-over-year decline in overall revenue in the fourth quarter, attributing six points of this decline to unwinding of the surge in demand experienced in late 2021 as we began moving past Covid, and the remaining four points to underlying trends. For its PeopleReady segment, which provides on-demand labor and skilled trades, transportation services and retail were particularly weak areas; however, manufacturing and hospitality have been more resiliant and its green energy business has grown. Conversely, Kelly Services Inc. (NASDAQ: KELYA, KELYB) reported weakening demand from its manufacturing and industrial distribution clients and a 17% year-over-year decline in its Professional & Industrial division in the fourth quarter.
One source of weakness for industrial staffing is continuing post-Covid economic normalization. At the beginning of the pandemic, as in person activities were limited or altogether shuttered, nearly everything shifted online. Shopping, in particular, became an online activity, whether buying the weekly groceries or furniture for a home office. Simultaneously, spending on services fell dramatically, in favor of physical goods purchases – bought online and ordered for delivery. While this has gradually normalized since early 2022, only about one-third of this shift has unwound thus far.
The shift to online sales encouraged a perhaps excessive expansion in warehousing, logistics and delivery services. By third quarter 2022, as consumption patterns normalized, even Amazon was canceling plans for new warehouses and closing existing facilities. As a result, activity in the bread-and-butter client verticals for industrial staffing has broadly plateaued or declined in recent months. To the extent this is indeed driven by post-Covid normalization, I expect these plateaus and declines to persist.
Monthly Employment Growth for Select Industrial Staffing Client Industries (Three-month moving averages)
Click on chart to enlarge
Source: SIA and U.S. Bureau of Labor Statistics
While warehousing and logistics see limited near-term growth, other skill areas served by the industrial staffing segment are continuing to recover from the pandemic. In recent months, employment growth and job openings have been particularly strong in leisure and hospitality, another important client industry for industrial staffing. Retail trade has not been as strong, but also is continuing its recovery from the pandemic recession. These client industries may provide opportunities for renewed growth for industrial staffing companies as warehousing and logistics cool.
