By: John Rossheim
June 5, 2012
Heading toward the second half of 2012, staffing trends show that agencies are cautiously confident of their prospects in the intermediate term, laying their bets on either economic recovery or a continuation of business uncertainty that argues for broad use of contingent workers.
Some staffing firms sense that their book of business could still tip either way.
“I can’t say we’ve seen a slowdown, but there’s been a drop-off in year-to-year growth in the first quarter compared to the first quarter of 2011,” says Joel Capperella, vice president of marketing at staffing firm Yoh in Philadelphia. “We’re still growing, but more slowly.”
But if the trend of the past year or so continues, healthy growth lays ahead.
Employment in temporary services grew 8.7 percent over the 12 months ending in April, compared with a gain of just 3.5 percent for professional and business services overall, according to the Bureau of Labor Statistics.
Indeed, recent data point to better times than contingent-worker suppliers have seen in several years. At the end of April, the American Staffing Association’s staffing index was up 8 percent over a year earlier and following a more positive trend than in any year since 2007.
Emerging technologies are a niche of strength
Some rather narrow niches of the staffing market -- think energy and mobile -- are seeing very strong growth.
“Up-and-coming technologies like cloud computing and SaaS require changes in the workforce,” says Capperella.
In these IT specialties employers often can’t make direct hires quickly enough, so they’re resorting to higher-priced contract labor for the near term.
“There’s increasing velocity in staffing for app development and mobile chips,” says Bryan Pena, vice president for contingent workforce strategies and research at Staffing Industry Analysts in Mountain View, Calif.
By contrast, staffing in traditional business disciplines, even those that were very strong before the 2007-2009 recession, are still lagging. “There’s a leveling of some types of business, like finance and accounting,” says Pena.
Like it or not, managed services are back
Managed service programs, which largely fell by the wayside during the recession, are enjoying something of a comeback, to the chagrin of smaller, traditional staffing agencies.
“The staffing industry has come to grudging acceptance of the MSP model,” says Pena. “MSPs focus on speed and cost containment, whereas staffing suppliers are relational.”
Still, most staffing agencies feel compelled to take their orders wherever they can get them. “MSP is hurting us,” says Ann Webster, president of Aquent, a Boston-based staffing firm specializing in marketing and design professionals.
Aquent gets 30 percent of its business through such third parties. “With direct hire, our order fill rate is about 80 percent; our MSP fill rate drops to 35 to 45 percent.”
But some employers, having become very picky about even contingent workers, are wary of a staffing model that they see as reducing skilled workers to a commodity.
“Because of the limitations of MSP programs, we’re getting more and more work that’s SOW,” says Webster. “Especially for mission-critical initiatives in marketing organizations, leaders are told, ‘Work with whatever vendors you want.’ ”
Recruitment process outsourcing has also begun a revival. “We’ve had a tremendous increase in inquiries for RPO,” says Capperella. “We have a pretty full pipeline, and we’ve closed some deals this year.”
Temp to perm, forever
With a large supply of qualified professionals looking for work, temp to perm becomes more mainstream with each passing year. An uncertain business environment and rising costs for full-time employees are also driving adoption of temp to perm.
“It’s more popular than ever,” says Webster. “At the end of each quarter, we have clients take large groups of temps and convert them to permanent hires. The conversion rate has gone up by double digits.”
Structural change to greater use of contingent labor?
For years, staffing firms and those who represent their industry have talked up contingency labor as a talent strategy whose time has come.
“Demand-based hiring is an approach to hiring that recognizes the needs of a given business group can be cyclical or variable, and top organizations are implementing it,” says Allison O’Kelly, CEO of staffing firm Moms Corps in Atlanta.
One industry representative proposes his own litmus test for the kind of structural change that could signal a new stage of growth in staffing.
“Now about 1.8 percent of the nonfarm labor force is temporary and contact labor,” says Steve Berchem, chief operating officer of the American Staffing Association in Alexandria, Va. “If we exceed the previous peak of about 2 percent, we’ll know there’s been a structural shift to the use of more contingent labor.”