March 6, 2025 - Hiring tastes are changing, and staffing firms are feeling it. While staffing firm revenues normally track the health of the U.S. economy and job market, these two appear to have decoupled in the past few years. The group Staffing Industry Analysts estimates staffing firm revenues will be down 10% this year.

In this article, we explore several reasons for this. We also share our hypothesis that some of the forces dragging staffing revenues down may soon reverse — for select firms. Demand for some skills will no doubt decline, but others will rise. Clever firms will adapt to meet this change.

The Crisis of Talent in Transition

With the ongoing specter of recession, employers continue to shed employees. U.S. companies cut 722,000 jobs last year, including 152,000 in the tech industry alone. And while the overall economy gained 2.2 million jobs, this is half a million jobs fewer than the year before.

Yet GDP grew 2.5%. If the economy is growing, why is employment not?

If we examine specific sectors of skilled labor, the picture becomes clearer. The Bureau of Labor Statistics expects 10.4% more STEM-related jobs by 2033. And some STEM subsectors are hiring, such as pharmacy and machinery. Yet employers in these sectors are also conducting layoffs — roughly 150,000 last year alone.

Some STEM employers are hiring and laying off at the same time. The software maker Intuit announced it was laying off 1,800 workers while hiring new ones in AI-related roles.

We are likely seeing the continuation of the so-called “great reshuffling.” Employers are reckoning with the change they must undergo to remain relevant and the inappropriately skilled workforces they currently have.

Much of this hiring layoff churn is driven by automation and AI. While statistics about actual AI job displacement are difficult to come by, it is clear some change is coming. By 2027, the World Economic Forum estimates 23% of jobs worldwide will change substantially. The group’s economists estimate that we will see 83 million fewer existing jobs worldwide, while 69 million will be created.

In this shuffle, employees in the skilled trades are likely to do well if they upskill. As discussed in our latest opportunities report, skilled trade wages rose 7.3% compared to the economy-wide employment costs at 4.4%. These individuals are in demand.

Corporation Transformation Is Really a Staffing Exercise in Disguise

As large organizations attempt to reorient their workforces to the age of AI and automation, a majority will not succeed. According to Bain & Company, 88% of corporate transformations fail.

Two of the top three reasons for that failure are staffing-related:

• Failure to focus on critical roles
• Relying on too shallow of a talent pool

A further review of other transformation surveys shows that talent is often a critical, if not the critical, factor. Consider the survey by the IT services firm TEKsystems. Siloed mindsets, a culture of learning, and gaps in technical skills all suggest firms are having trouble placing and cultivating talent.

Also, consider Citrin Cooperman’s survey of 1,000 private companies from last year, which found that just 38% felt they had made significant progress on their upskilling initiative. Many had difficulty retaining upskilled workers, and almost 90% said they must look outside of either organization for talent to help them rise to advanced technological readiness.

This is all to say that the shortage of skilled workers and technological readiness are linked. It is a pain corporations, large and small, now feel, and one that staffing firms can address.

Future Staffing Firms Will Provide a Different Mix of Solutions

If staffing firm revenues decline 10% this year, firms must look for new income sources. One of those options may be to advise corporations on transformations and talent. They might provide that tech-savvy talent, or training, or both.

In addition, staffing firms may develop their own intellectual property and software products for these companies. According to our report, companies are not making the progress they want to make in upskilling their workforces, and they may welcome insights, tools, and advice on quality hiring.

Companies are already spending more money on staffing software and solutions. Staffing Industry Analysts report that the industry for such placement software has risen to $19 billion as human resources teams offset the cost of staffing fees. But again, this is a consulting opportunity for staffing firms.

The software itself does not provide expertise. Many human resources departments will no doubt find they need help setting up such software and providing their teams with the experience to design roles and know what to look for. This is especially true when hiring for roles they do not currently have, which is increasingly the case.

Staffing Firms Have a Transformational Opportunity

The one thing that is certain this year is staffing firms cannot continue with the status quo. With the industry in flux and revenues falling, firms must look to new growth areas and what is next. Perhaps the transformation they can offer to companies must start at home. This year will likely be the one where staffing firms transform themselves.

To discuss these topics, contact our Staffing Industry Practice.