The pandemic recession was both the shortest and the sharpest recession in the history of the US, with economic activity collapsing in March and April of 2020, but recovering by May. In this short time, employment fell by nearly 22 million — to 130.5 million in April 2020 from 152.5 million in February 2020.
The pandemic recession also gave way to the strongest recovery in US history. From May 2020 through May 2022, on average 0.60% of the employment lost in the recession has been restored each month — nearly twice the recovery rate of the second-strongest recovery, which followed the 1953 recession.
As one impact from such a dramatic rebound, job vacancies surged to all-time highs in 2021 and continue to grow in 2022.
A very long run view of job openings
Sources: SIA, Barnichon’s Composite Help-Wanted Index, Bureau of Labor Statistics Job Openings and Labor Turnover Survey
This highest-ever job openings level has enabled the highest labor turnover on record, driving wages up and exacerbating staffing challenges. The primary industry sectors relying on industrial staffing firms to fill their workforce needs — trade transportation and utilities, manufacturing, construction, and leisure and hospitality are all at or near record job-vacancy levels. Collectively, these sectors have approximately 5 million unfilled job openings today.
The resulting recruiting difficulty has been kind to industrial staffing. The US industrial staffing market reached $36.5 billion in 2021, and we forecast further growth in 2022 and 2023. Per our Staffing Industry Benchmarking Consortium, industrial staffing bill rates increased 16.1% from 2020 to 2021, while pay rates increased a lower 13.8%, suggesting improved profit margins in this vertical.
However, the strength of the recovery may prove its undoing. Inflation, first caused by the breakdown of global supply chains early in the pandemic, continues now due to excess demand (consumer spending remains 8% above its pre-pandemic trend). With inflation at rates last seen in the early 1980s, it is now the main economic problem facing the US. To combat inflation, the Federal Reserve is rapidly increasing interest rates — and also targeting a reduction in labor demand to cool the hot labor market and halt a potential wage-price spiral before it starts.
The increasing interest rate environment has deflated prices for risky assets such as equities and cryptocurrencies, has begun to cool residential real estate prices, and may have consequences for M&A activity. This has engendered recession talk.
Given these recent trends, industrial staffing firms should prepare for a potentially more volatile business environment. Clients may be impacted by rising interest rates, technology clients that have experienced a decline in stock price may face idiosyncratic headwinds, and retail clients may have reduced their revenue outlooks. Staffing executives may also wish to be more cautious in their near-term internal staff hiring plans, and in the valuation of potential acquisitions. For more insight on current trends in industrial staffing, we invite you to download SIA’s recently published Industrial Staffing Growth Assessment report.
