Staffing Industry Analysts has lowered its forecast for the US industrial staffing segment to 1% expansion in 2019, down from the 4% growth rate projected in April, which implies a market size of $35.3 billion. Key factors for the deceleration include tariffs and trade uncertainty; slowing global growth; and a weakening pace of expansion in bill rates and pay rates.

Ongoing trade tensions with China, which began in the fall of last year, are continuing to be a drag on the US manufacturing sector, which has seen a decline in exports along with increased prices for imported raw materials and parts. According to the Institute for Supply Management’s August survey of manufacturers, the headline PMI index fell to 49.1, the New Orders index declined to 47.2, and the Employment index dropped to 47.4.

Job gains in manufacturing have also been sluggish so far this year, according to data from the US Bureau of Labor Statistics. In looking at the change in employment over the past six months for durable goods manufacturing industries, as shown in the graph, we see that jobs were up in computer and electronic products manufacturing (+15,000), but down in manufacturers of machinery (-5,000), primary metals (-4,000), furniture (-3,000) and wood products (-2,000).  Among nondurable manufacturers, jobs were up for plastics and rubber (+6,000), but down for printing (-3,000) and petroleum and coal products (-3,000).

Click on chart to enlarge.

The slowdown in manufacturing is a headwind for industrial temporary staffing, as manufacturing clients have accounted for as much as 40% of industrial staffing revenue in some recent years. TrueBlue reported that revenue from its PeopleReady division swung from 3% year-over-year growth in the first quarter of 2019 to a 2% decline in the second quarter. In addition, management shared that the year-over-year revenue trend from manufacturing clients deteriorated 10 percentage points when comparing the first-quarter trend with the second quarter.

A key question facing the industry is, how long will trade tensions last, and does the slowdown represent a temporary pause or the start of a longer decline that could be part of a recession in the US economy?

For more detailed analysis on this topic, SIA corporate members are encouraged to download our full report on the US Staffing Industry Forecast: 2019 Update.