SI Review: January/February 2014

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Research Report: Many Hats

The skill segments that define the U.S. temporary staffing market

The U.S. temporary workforce is larger than ever, according to two closely-watched measures reported by the Bureau of Labor Statistics. In its monthly jobs report regarding December 2013, the BLS reported that the U.S. temporary help industry had reached a record 2.8 million jobs. In addition, the nationwide temporary penetration rate (or ratio of temp help jobs to total jobs) had ascended to 2.06 percent, surpassing the previous record of 2.03 percent that occurred in April 2000. In other words, there are more temp jobs in the U.S. economy today than ever before, and temp jobs are more commonplace in terms of their share of the workforce. Given these records, now seems like a perfect time to examine the profile of the U.S. temporary workforce and market, noting a faster growth trend in the professional segment in general, while observing the secular and cyclical trends unique to each of the major skill segments that define the market.

Professional Segment Growing Faster

The simplest categorization of U.S. temporary jobs involves splitting them into professional jobs and nonprofessional jobs (the latter sometimes called commercial jobs). The commercial segment includes temp workers with office/clerical or industrial skills, while the professional segment includes temp workers with IT, engineering, healthcare, and finance/accounting skills, to name the most common examples. Professional jobs made up 21 percent of the U.S. temporary workforce in 2011, according to estimates in Staffing Industry Analysts’ 2013 Staffing Occupational Markets Guidebook, yet they accounted for 53 percent of the 2011 U.S. temporary staffing market in terms of dollars, according to SIA’s most recent U.S. industry forecast. In other words, while only one in five temp jobs in the U.S. economy was professional, the higher wages of these professional jobs meant that the billings for these temp professional workers generated slightly more than half of the dollars spent on U.S. temporary staffing.

The trend line over the past decade shows professional staffing gaining about half a percentage point per year in increased share of the U.S. temp market,  while commercial staffing loses a corresponding amount of share (note that commercial staffing is still growing — just not as fast as professional). This trend could easily continue as the overall temp penetration rate for professional jobs (1.2 percent in 2011) remains significantly lower than for commercial jobs (2.5 percent in 2011), implying more upside potential for professional staffing as the acceptance of temporary professional jobs climbs toward the levels already achieved in the more mature commercial market.

It is worth noting that upside potential exists in the commercial segment as well, as the overall 2.5 percent temp penetration rate is misleading if assumed uniform. While temp penetration (and acceptance) appeared high in production occupations (6.3 percent) and transportation and material moving occupations (5.3 percent), the temp penetration rate was below average in construction occupations (1.6 percent), installation, maintenance, and repair occupations (0.6 percent), and food preparation and serving (0.3 percent) to name a few examples of commercial staffing markets that remain undeveloped.

IT and Engineering Lead Growth

The above chart shows the relative sizes of major skill segments that comprise the U.S. temp staffing market, which are a finer subdivision of the professional and commercial market segments. Note that “skill segments” are based on the skill set of the temp worker should not be confused with end markets (verticals); for example, a computer programmer on assignment at a hospital is classified in the IT skill segment, not the healthcare skill segment.

As the chart shows, the industrial skill segment is the largest skill segment, with an estimated market size of $28.7 billion in 2013. The IT skill segment is the second-largest market, with an estimated size of $23.8 billion. The IT segment benefits from being the only professional skill segment with an above average temp penetration rate (we estimated 5.1 percent in 2011). The office/ clerical segment has fallen to third largest in recent years, with estimated size of $18.3 billion, followed by the healthcare segment ($9.6 billion), engineering segment ($7.8 billion), finance/ accounting segment ($6.2 billion), and legal segment ($0.9 billion). The clinical/scientific, marketing/creative, and education/library segments are not included on this chart, as we have not tracked their market sizes back 10 years.

Over this period, the IT and engineering skill segments have grown the fastest with a compound annualized growth rate (CAGR) of 2.9 percent on top of inflation. The industrial and finance/ accounting skill segments had a CAGR of 0.1 percent, meaning that they fully recovered in 2013 to match their 2004 levels, in inflation-adjusted dollars. And lastly, the healthcare (-1.9 percent CAGR), office/clerical (-2.2 percent CAGR), and legal (-4.6 percent CAGR) skill segments have declined in inflation-adjusted terms, as their market size in 2013 had yet to reclaim their prerecession 2004 levels.

From the chart, it is also noteworthy that the office/clerical and industrial market sizes appear to be more cyclical than the professional segments, meaning steeper declines during recessions and then a more intense “snap back” growth during recovery.

Timothy Landhuis is a senior research analyst at Staffing Industry Analysts. He can be reached at tlandhuis@staffingindustry.com

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