How Hot Is Your Market?
A glance at recent history can help you boost proﬁt
By Timothy Landhuis
As an executive in the staﬃng industry, your company relies on you to know the supply-and-demand landscape of your target markets, in order to devise the growth plans, resource budgets and pricing strategies that will lead to the greatest proﬁts. One perspective on whether demand is “hot” for a given staﬃng segment is to compare current demand with the historical peak demand for that segment. In this article, we examine projected 2013 U.S. market sizes for the major temporary staﬃng skill sets and compare them with their pre-recession peaks, in order to frame current conditions in their historical context.
The following temporary staﬃng markets are expected to surpass their pre-recession peak: locum tenens (or physician) staﬃng, information technology, industrial, engineering, marketing/creative and clinical/ scientiﬁc.
In these market segments, high demand may imply greater scarcity of candidates and longer order ﬁll times, but also the potential for higher bill rates, higher gross margins, and higher proﬁts. Knowing that demand is at a historical high level may help you negotiate pricing that ensures your ﬁrm is being compensated for the heightened challenge of ﬁnding quality candidates in these ﬁelds.
These segments may also be attractive near-term markets for growing your business to the extent that they have secular drivers independent of the business cycle. For example, the looming physician shortage and health- care reform are driving growth in locum tenens, while rapid technology advances continue to boost IT staﬃng growth. However, markets at historical peaks may soon plateau if cyclical demand is satisﬁed and there is an absence of secular drivers.
Following the same logic as above, these staﬃng markets are “recovering” by historical standards because their projected 2013 U.S. market size is less than their pre-recession peak: allied healthcare, oﬃce/clerical, ﬁnance/accounting, legal, per diem nurse, direct hire (or permanent placement) staﬃng, and travel nurse.
In these segments, low demand may imply a greater supply of temporary worker candidates and faster order ﬁll times, but also imply lower bill rates, lower gross margins, and down- ward pressure on operating proﬁts, as staﬃng ﬁrms compete for fewer orders.
A silver lining for these markets is that although demand may be down, these markets may oﬀer growth potential if the demand factors that existed during their peak year return.
The Secular Shift
Another phenomenon worth mentioning is the recent evidence for an upward secular shift in demand industrywide. From 2010 to 2012, the U.S. staﬃng industry grew faster than the historical trend of the past 16 years would have predicted, when using GDP growth as the predictor. Causes for the secular shift include a shift away from independent contractors due to new IRS enforcement initiatives, as well as greater appreciation for the value of a contingent workforce as a result of the recession.
If the secular shift continues, these new sources of demand may act as a tailwind for growth in all of the segments mentioned above, both “hot” and “recovering” alike.
Timothy J. Landhuis is a research analyst with Staffing Industry Analysts. He can be reached at firstname.lastname@example.org.
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