IT Staffing Report: April 9, 2015

Print

Updated US staffing industry forecast predicts continued strong growth for IT

The IT staffing business has been fertile ground for growth in recent years, with trends such as mobile connectivity, big data analytics, cloud computing and cybersecurity bolstering demand for skilled IT professionals. According to our updated forecast published this week, the IT staffing market in the US is anticipated to grow 7% in 2015 and 6% in 2016. This projection would bring the total US market to a scale of $29.1 billion in 2016, an all-time high. Market growth is driven by both cyclical and secular factors.

Derived in part from the consensus of several widely cited forecasts, we anticipate US GDP growth to accelerate to 2.9% in 2015 from a rate of 2.4% in 2014, before slowing slightly to 2.7% in 2016. In the following graph, we plot GDP growth versus growth in the temporary IT staffing market for each year back to 1998. The relationship yields an r-squared coefficient of 0.50, meaning that 50% of the change in the IT staffing market over this period can be explained by changes in GDP. This tells us that, while still an important driver, the broader economy does not have the same impact on IT as it does on the overall temporary staffing industry, which has an r-squared value of 0.76.

The reason that IT growth is not as dependent upon the health of the overall economy is that, unlike most segments of the staffing market, the tech industry has yet to fully mature. As such, it is still experiencing secular growth in overall employment, a rising tide that continues to buoy IT staffing volumes. This fact is driven home by the following graph, which shows employment in IT occupations has increased by nearly 31% over the past 14 years, compared to just 5.3% for total nonfarm employment. This equates to a compound annual growth rate (CAGR) of 1.93% for IT and 0.37% for total employment over the same period.

It should be noted this period encompasses the early-2000s when, during the recession following the bursting of the tech bubble, IT employment contracted to a far more significant degree than overall employment. Conversely, tech jobs held up much better than the broader economy through the Great Recession of 2007-2009. Focusing on the recent period of recovery, IT employment had a CAGR of nearly 4% since 2010.

We do not expect this trend of outsized employment growth to abate any time soon. Our confidence is supported by the US Bureau of Labor Statistics’ long-term employment projections, which suggest growth of 18.0% for the “Computer and mathematical occupation” category from the baseline in 2012 through 2022, well above the 10.8% growth forecast for total employment. In the following graph, we update the cumulative employment growth chart shown earlier, projecting both categories forward on a linear basis to reach the levels predicted by BLS in 2022.

Though certain to remain a highly competitive environment, IT staffing is a good place to focus for business development over the next several years, with the potential to continue growing at a multiple of GDP. The big unknown relates to the timing of the next recession. We project continued growth in GDP through at least 2016. However, the current expansion will reach six years this July, longer than the average of the last five such periods dating back to 1980. For the hyper-cyclical temporary staffing industry, fortunes can turn on a dime. Even in a market with strong, secular trends, IT staffing managers are advised to keep close watch on economic trends for any signs of an impending downturn.