Amid political and economic uncertainty, engineering has been one of the poorest performing sectors of the US temporary staffing market over the past two years. We estimate revenue in the engineering segment declined by 2% in 2016 following a 1% fall in 2015.
In our April forecast update, we project growth to slightly accelerate through this year as the economic backdrop improves, alleviating companies’ budgetary constraints and thus allowing them to increase spend on attractive engineering investments. Stabilization in oil prices has laid the groundwork for a slow resumption in energy sector projects this year.
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The fall in the price of oil has been beneficial to some subsectors of engineering staffing, however. The decline, as well as employment gains, and low interest rates led to record sales of cars and trucks in 2016. The increasing sales and production of vehicles has been a driver of the growth in the automotive engineering staffing market, as engineers are required to design, research, develop and produce vehicles to meet the demand. Although the record sales may represent a cyclical peak, and another solid year of vehicle sales is expected in 2017.
In the construction and infrastructure subsectors, the story is more mixed. Private investment has grown in some areas, such as commercial and highway projects, even as investment in less visible areas generally supported by local or federal government funds, such as water, sewage, and public safety, has declined. Meanwhile, most engineering firms are trying to interpret mixed messages from the new US administration regarding its proposed mega-infrastructure spending program. We expect the new US administration to drive investment in infrastructure projects, though it would take until 2018 before that translates into increased staffing demand.
With early indications that the new US administration may adopt more restrictive immigration policies, especially related to changes in H1B policies, legislative and regulatory developments will need to be closely monitored in the coming year. Given some engineering occupations, including mechanical and environmental engineers, are effectively at full employment with unemployment under 2%, any effort to further restrict access to high-tech talent would exacerbate the chronic domestic shortage of talent in high-demand skill sets. This could have an adverse effect on growth and create a strong headwind for the sector.
