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Temp Staffing Revenue Soars Above a Slow Recovery

Generally, a decline in temporary employment precedes a slowdown in the economy. Temporary staffing agencies hit hard during the recession are making a slow but steady comeback. The temporary staffing industry accounts for $223 billion in annual revenue from nearly 32,000 agencies nationwide. Expectations for a moderate growth rate by 2015 are due to outsourcing, technology solutions and leasing trends.

Considered a leading indicator of domestic economic conditions, a rise in revenue for staffing agencies is a good sign. As corporate profits fell during the recession, so did the need for temporary help. Conversely, slow improvement in the overall labor market is a direct result in the demand for temporary workers.

Temporary Help On-Demand

The nature of the temporary staffing industry is to provide short-term labor demands within different industries such as manufacturing and services. Typically, staffing agencies provide workers for many different sectors and industries. Across all industries and regions, industrial and administrative workers are in higher demand. However, the staffing industry has also experienced an increase in demand for professional and business services positions.

How revenue is distributed largely depends on the number of agencies and positions available within a specific region. Population also plays a role in the distribution of revenues, with the western and Mid-Atlantic states having a higher revenue share. This is because high value jobs are more common in these regions.

When demand in all sectors and industries for temporary help decline, overall employment for that particular industry falls.

Temporary Staffing and the Overall Economy

When an economic downturn begins, companies will typically stop hiring temporary workers. As things turn around, the same companies may hire temporary employees to fill gaps from deep layoffs. Most economists view this as a typical response to the end of a recession. Even though the temporary staffing is a fragmented industry, because of this impact on employment, it realizes high levels of profitability.

Generally, the industry is driven by factors that affect the broader economy such as business sentiment and unemployment. Performance improves at the initial signs of an upswing in the business cycle. As a result, projections are for a 2.2% increase in revenue for 2013. Continued economic recovery will give companies more room to expand labor.

Navigating the Competitive Landscape for Revenue Growth

In the U.S., the staffing industry is divided into three segments: placement agencies, professional employer organizations and temporary help services. About half of workers are employed by temporary help services. With all three segments combined, revenue grew by 12 percent in November 2011 according to a Pulse Survey of staffing agencies conducted by Staffing Industry Analysts.

While job growth increases demand for temporary workers, good marketing also factors into the profitability of staffing agencies. Individual companies must recruit qualified candidates to fill positions within their region. Larger staffing agencies have a cost advantage for marketing and managing back office operations. Smaller agencies can still compete by specializing in a specific job function or industry such as information technology.

Companies look to temporary staffing services for flexibility in employment options. Additionally, they can find quality permanent employees for future hiring without incurring recruitment costs.

While recessions often lead to a disproportionate number of temporary workers being laid off, many are also hired first when the economy recovers. This is a fortunate occurrence for the industry as the economy continues to show signs of improvement. As demand for goods and services increase, companies will need to meet productivity levels.

The role of the temporary staffing industry has expanded since 1990. Because it functions as a macroeconomic buffer during recessions, this role will continue to grow along with revenue.