The demand for workers is on the rise, but the number of recruiters in the industry is declining. According to data released by the Bureau of Labor Statistics, the employment services sector saw a decrease of 14,700 employees in September — marking the sixth consecutive month of decline. This trend reflects a broader pattern, as the hiring industry has consistently shed workers for all but two months in the past year.
The Role of Employment Services Workers
Employment services workers play a crucial role in sourcing and managing talent for companies. They may either work on a contractual basis or be integrated into a company’s HR department.
Strong Hiring in Other Sectors
While employment services may be experiencing a downturn, the overall labor market remains robust. In September alone, the United States added an impressive 336,000 new jobs, surpassing the predictions of Wall Street economists who had anticipated only 170,000 new jobs. This data indicates that companies are actively seeking new hires. Notably, the increase in job numbers was primarily driven by hiring in bars, restaurants, hotels, healthcare providers, and government positions.
The Decline in Temporary Workers
One factor contributing to the decline in employment services is the reduction in temporary workers. In September, there were 4,200 fewer temporary workers in the sector compared to the previous month. However, this decline is not necessarily negative. Julia Pollak, the chief economist at ZipRecruiter, views it as a positive sign of the economy returning to normal. While the number of jobs in employment services continues to decrease, it still surpasses pre-pandemic levels.
A Shift Towards Normalcy
Despite the decline, there were still over 2.9 million temporary recruiters in September, compared to 2.8 million in January 2020. In total, there were 3.7 million recruiters last month, as opposed to 3.5 million in January 2020. These figures indicate that the industry is gradually recovering and adapting to changing circumstances.
Overall, the employment services sector is undergoing a transformation. Although the number of recruiters has decreased, the broader labor market’s need for workers persists. This shift underscores the importance of staying agile and adaptable in an evolving job market.
Labor Shortage and Hiring Craze in Post-Pandemic Economy
The COVID-19 pandemic has had a profound impact on the labor market, leading to a shortage of workers in 2020. However, as the economy reopened in 2021 and early 2022, a hiring craze ensued. Companies found themselves understaffed and faced difficulties in recruitment, resulting in an overreliance on temporary agencies, which came at a significant financial cost.
The downward trend in recruiter employment began in the months following the Federal Reserve’s decision to hike interest rates to combat high inflation. With major tech companies announcing layoffs, recruiters were among the first to lose their jobs. These companies anticipated a slowdown in hiring due to increased borrowing costs. Currently, the Fed’s benchmark interest rate ranges from 5.25% to 5.50%.
Additionally, there has been a growing trend of companies outsourcing certain employment services. Economists point out that human resources consulting services have experienced rapid growth since the start of the pandemic. The latest detailed data from the Bureau of Labor Statistics (BLS) shows that in July 2021, around 99,800 workers were employed in this sector compared to only 76,600 workers in July 2020.
As interest rates remain high and the prices of raw materials and labor continue to rise, many companies are compelled to cut costs. One strategy is to replace some workers with technology. Mark Hamrick, a senior economic analyst at Bankrate, emphasizes that regardless of whether a company is expanding its workforce, maintaining it, or downsizing, there is a constant need for HR support. Access to HR services remains crucial for employees who rely on these resources throughout their employment journey.