By Timothy Landhuis, Director of Research, North America, Staffing Industry Analysts.
Despite the recent rise in isolationism and backlash to globalism appearing in the US as it has in many other developed countries, the US economy nevertheless offers an extraordinary level of opportunity for investment and business expansion for firms across many industry verticals, including for those firms offering staffing and workforce solutions. In this blog, we will take a quick tour of current market sizes and growth trends.
The US Economy
The US is home to a massive and diversified economy with an innovative culture. As the third most populous country (325 million people), the United States holds the title of having the largest national economy in the world (currently $20 trillion a year), a distinction it has held over much of the past century. The US is an innovator and leading producer across a broad range of sectors, from agriculture to manufacturing to financial services to healthcare to technology. Thanks to the shale boom of the past decade, the US is also now the leading producer of oil and gas in the world. The US has spawned some of the most innovative and globally disruptive companies--including Amazon, Apple, Facebook, Google, Netflix, and Uber—helping to protect the ongoing competitiveness of the US economy.
While the US economy is not immune from volatility due to the business cycle or other periodic shocks, it does enjoy an enhanced level of stability due to its diversified economy, its large domestic market that make it less dependent on international trade, and the stability of the US dollar. Growth in the US economy is also bolstered by a steady stream of net migration that has supported population growth rates faster than in many other developed countries. The US economy also enjoys geographic diversification, with roughly 50 metro areas with over a million in population spread across the country. Each of these major metro areas contain their own unique mix of industries and cultural nuances that allow niche staffing firms and workforce solutions providers to gain competitive advantages in specific geographic markets.
The US Contingent Workforce
The US is the country with the largest staffing market and the largest contingent workforce in terms of market size. The market for US temporary staffing by agencies reached $124 billion in 2017, according to estimates by SIA, which has been tracking the US staffing industry for three decades. As of February, 3.05 million Americans were employed by a temporary staffing agency, accounting for 2.03% of all non-farm jobs, according to the US Bureau of Labor Statistics.
In addition to temporary agency workers, SIA tracks four other categories of contingent workers: human cloud workers, self-employed workers, temporary workers sourced directly by a client, and SOW consultants. Human cloud workers are defined as those working via an online platform (such as Uber.) SIA estimates that human cloud workers serving businesses (as opposed to consumers) collected $3 billion in revenue in 2017. Self-employed workers and independent contractors serving businesses (other than those working via staffing firms or the human cloud) generated $142 billion in revenue. Temporary workers sourced directly by companies--such as seasonal workers, interns, workers in an internal pool, and those on a fixed contract—generated revenue of $43 billion. Statement-of-work (SOW) consultants serving businesses and paid on the basis of project deliverables collected $246 billion in 2017 (examples include management consulting, auditing, and software integration.) Adding the five categories together yields a grand total of $558 billion for the US contingent workforce serving businesses.
In terms of annual growth trends, an SIA comparison of 2015 and 2017 market data in the US showed flat growth for the self-employed category, moderate growth for the temporary staffing market and temporary workers sourced directly, low double digit growth for the SOW consulting market, and high double digit growth in the emerging human cloud market.
The US Temporary Staffing Industry
The US temporary staffing industry is a highly competitive and fragmented market. In 2017, the three largest firms (Allegis Group, Randstad and Adecco) combined accounted for 13% of the market. In terms of skill segment, the US temporary staffing industry began decades ago focused on industrial and office/clerical jobs, but now professional occupations account for 59% of the market by revenue, according to SIA estimates. IT occupations account for 24% of the market, followed by healthcare (13%), engineering (7%), and finance/accounting (7%). The remaining portion reflects life sciences, marketing/creative, education, legal and other professional occupations.
Regarding the market growth outlook for 2019, SIA projects 3% expansion to reach $131.3 billion. Following ten years of economic expansion, and the market at a record size, the 3% growth rate still represents a fairly strong rate of growth. The largest headwind across the industry is a shortage of candidates as the US economy nears a state of full employment, with unemployment rates close to a 50 year low.
In conclusion, the US staffing industry and contingent workforce remain a vital pillar of the US economy. With business activity at record levels, the US market represents an attractive place for those staffing firms able to carve out a competitive or disruptive niche.