Should Your Staffing Firm Be Preparing for an Impending Recession?
The term “recession” evokes a lot of fear and distress in most hard-working Americans and business owners. While the economy has continued to remain strong and steady over the past few years, with 2008-related flashbacks still somewhat fresh in everyone’s minds and the economy’s historically-proven ebbs and flows, many people are left wondering: when will the other shoe drop?
When it comes to predicting when the next great recession might hit, there are various factors that have to be accounted for. While no one has been able to pin down a specific year, here are some key timeframes experts are paying close attention to:
- 2019-2020: Many economists have suggested that a tightening labor force, the pushing up of wages, skills gaps, and driving inflation could cause the federal reserve to raise interest rates. However, Dr. Alan Beaulieu, president of ITR Economics, stated that it’s more likely the national gross domestic product (GDP) is “only going to go flat” in 2019, while industrial production is more likely to see a mild recession during this time period.
- 2021-2022: Working off the idea that 2019 might simply be a stagnant time for the GDP, others economic experts predict that the next recession might be a few years from now. Still, investment banking organization Goldman Sachs claims that the odds of a recession happening over the next three years only sits at 36 percent—which is below historical average.
- 2030: Delving further into GDP predictions, PricewaterhouseCoopers projects that China will become the world’s largest economy by 2030—surpassing the United States. While this shift will bring forth a different employment market, job growth is the U.S. is projected to only increase slightly, compared to countries like China and India. Further, economists claim that a 1930s-style depression is likely to occur around this time period, based on mathematically-derived forecasting.
Impact on the Staffing Industry
So what does all of this mean for the staffing industry? Ultimately, the economic and employment markets have a direct influence on how the industry is expected to perform. While the past eight to nine years have seen the U.S. staffing industry trending upward, history shows that a continuation of this incline is unlikely.
Therefore, while industry analysts predict that there will be a 24 percent dip in U.S. staffing revenue between 2020 and 2022, the staffing industry is still projected to hit $200B in revenue by 2030—offering sizable growth opportunities for staffing businesses who are adequately prepared for these changes, and provide exceptional service to their clients.
What’s more, with an anticipated decrease in traditional full-time employees and an increase in contingent job types, the market continues to look promising for staffing companies (despite looming economic shifts) as long as firms continue to innovate and adapt with the times.
So Should You Be Preparing Then?
In short, the answer is yes—you should always be readying your organization to deal with any potential shifts in the economic and industry landscapes, including a recession. With that said, while the timing of when the next recession will hit is still up for debate, there are steps you can take in the meantime to ensure your success for when it does come.
During peak times, staffing companies should look into taking the following steps to ensure they’re less vulnerable when recessions hit:
- Have a flexible workforce
- Reduce fixed costs
- Maintain a healthy balance sheet
- Outsource roles
- Service less-cyclical industries and staff less-cyclical occupations
- Diversify through global expansion or by providing less cyclical services
- Create an MSP
- Renegotiate credit terms
To learn more about how to best prepare your staffing business for growth during potential recession times and other industry projections, download our whitepaper, “Aligning your Business’ Growth Plan with the Future Industry Landscape.” Also, to find out how People 2.0 can help ensure your financial and operational viability in all economic climates, contact us!
Source: SIA presentation, “Preparing for the Next Recession,” by Tony Gregoire (SIA director of research, The Americas) and John Nurthen (SIA executive director, global research).