What Can Staffing Companies Do to Prepare for an Economic Downturn?
The staffing industry has faced many roadblocks in recent years. Thanks to the COVID-19 pandemic and the shutdown that came with it, we are facing a potential economic downturn. And staffing companies need to prepare. It took nearly five years for the industry to recover from the job losses of the Great Recession. Although it is not guaranteed that we will be facing another economic challenge as large as this one, it is still crucial for staffing companies to be ready for anything.
It is natural for our economy to evolve as we, as a society, do. However, our economy has been subject to a lot of turbulence and change in recent years because of the global pandemic, political hostilities and the unpredictability of inflation. Even though it has been more than two years since its beginning, our economy is still adjusting.
So we, as a workforce, must learn to adjust with it. Our current economy is different from anything we have experienced; it is a new world, especially for the staffing industry. In 2020, unemployment numbers rose drastically because of shutdowns caused by the pandemic. The staffing industry took a great hit during the Great Recession, too. Luckily, they were able to bounce back coming out of it.
Although our economy has proven its ability to recover rather quickly, we are still swimming through the uncharted waters of our current economic state.
Adjusting to a New Way of Life (and Economy)
Job openings and opportunities surged to an all-time high in 2021 and continue to grow through 2022. This has become an overwhelming problem for the staffing industry. Multiple sectors that rely on industrial staffing firms to fill their workforce, like manufacturing, hospitality, construction and others, are facing new job-vacancy records. Almost 5 million staffing positions remain unfilled today, according to Federal Reserve Economic Data.
It is unknown where our economy will go from here. Because of this uncertainty, staffing companies must be equipped for just about anything.
What Does Economic Uncertainty Mean for Staffing Companies?
Staffing companies are hesitant to make permanent decisions these days with talk of possible economic disruption constantly making waves. Despite millions of open positions, cautious hiring has become a popular trend. Managers are holding off on hiring extra help to see where the state of our current economy goes.
In a recent poll by Express Employment Professionals, 60% of companies said they don’t have the capacity to hire more employees—but they are in need of a bigger workforce to manage workloads. Of these respondents, 42% said their company is keeping an eye on workloads leveling out before making the move to hire additional employees. About a third of respondents (32%) said they don’t even have the money within their respective budgets to hire any additional staff to bridge these gaps.
Just because staffing companies are focusing on perceived economic risks, this does not mean that these potential problems are sure to occur. Most staffing companies are concerned about increased cost pressures, higher interest rates, rising COVID-19 cases and supply chain issues. All of these play a part in their respective business conditions.
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There is no handbook on how to deal with a one-of-a-kind economic situation such as this one. But if PEOs are cautious, careful and conscious, they can still maintain success for themselves and retain their best workers. Workers who switched jobs received increases of 6.4% over the last year versus 4.7% for those that stayed at their jobs. This data goes back to 1997 and this is the widest gap we’ve ever seen. It may not seem like a big jump for PEOs, but it makes a difference for employees.
Slavic believes it to be crucial for the PEO industry to focus on professional and technological companies when moving forward and targeting new business in our ever-changing economy. “Because those will be the ones that are less prone to inflationary pressures than other types of businesses.”
Although federal policies, such as the contractionary monetary policy, are expected to be put into action to relieve these inflationary pressures, it is still crucial for PEOs to be mindful of these risks if they want to stay profitable and competitive within the industry.
“It really is up to the PEO to examine its client base, to examine the companies it’s going after,” Slavic said. “They can be, in a sense, advisers to their clients in navigating all this.”
Our new economy is still unexplored territory. Everyone is learning as they go. PEOs must be calculated in their client-based decision-making if they want to avoid falling victim to inflationary strains and economic hardships.
How Can Staffing Companies Prepare?
Right now, nothing about our economic state is set in stone. There is no way to know if we will go through another recession or not. Regardless, staffing companies need to be prepared for just about anything.
Staffing companies can prepare for a potential economic downturn in a few different ways. Working with reliable companies is a great way to establish roots during economic challenges. Staffing firms can also cut costs by using workforce management software. Familiarizing yourself with the resources that are available to you is another simple—yet effective—way to protect your company and clients. Focus on employee retention by using grant resources, open lines of credit and more.
Perfecting your hiring process is crucial to gaining invaluable employees that will help you flourish—even through economic difficulties. Look at your job postings. Are they clear and concise? Are you conveying exactly what you want and need for your openings? Now, look at your potential candidates. Are they qualified through experience? Do they have a breadth of knowledge that will help drive your company through any possible issues or hard times? Hiring quality, experienced employees will help make these navigation processes much more efficient.
Our economy is constantly evolving. Whether we go into a recession is still an unanswered question. But if that ends up being the case, it won’t last forever. Staffing companies can prepare for the worst and still come out successfully ahead.