Even as the economy recovered, businesses lacked the confidence to hire again. Companies that rent workers stepped in to help.
It wasn’t apparent at the time, but the Great Recession was one of the best things to ever happen to the American staffing industry.
Like virtually all businesses, staffing agencies unraveled when the economic downturn hit beginning in December 2007. More than a third of staffing employees lost their jobs, sapping the firms of revenue.
Then something remarkable happened. While the U.S. labor market struggled to rebound for years — employment did not fully recover until 2014 — staffing agencies quickly bounced back. From the depths of the recession, the staffing industry’s revenue has nearly doubled and staffing employment has increased 60 percent.
“There was a lack of confidence among business that they needed to hire back full-time employees,” said Richard Wahlquist, chief executive officer of the Alexandria, Va.-based American Staffing Association.
Meanwhile, “People came to staffing firms in larger numbers than we had ever seen, and the talent benches of staffing and recruitment firms were deeper than they ever had been in history,” Mr. Wahlquist said.
Fast-forward a decade, and the increasing reliance on staffing companies to connect job-seekers with employers is paying off in a big way for the staffing industry.
From ‘Kelly Girls’ to skills gap
The modern American staffing industry traces its roots back to demand for secretaries.
During the postwar economic boom of the 1940s, the Detroit-based Russell Kelly Office Service hired women to complete typing work. From a small office, the company supplied a pre-qualified typing staff ready for short-term assignments at a moment’s notice. It drew up a “Kelly Girls” ad campaign that became an iconic phrase synonymous with temporary staffing.
By 2007, the U.S. staffing industry was placing an average of 2.2 million employees each week in virtually all job sectors. For companies, temporary staffing had evolved “from episodic filling of jobs into much more strategic use,” Mr. Wahlquist said.
Companies lean on staffing industry for workers
Even as the economy recovered, staffing agencies have continued to grow as a tightening labor market and skills gaps make their services even more in demand.
Source: American Staffing Association
That strategy became embedded in hiring culture, especially as the economy recovered after the recession.
Layoffs hit many employers and workers hard through the economic downturn. In the Pittsburgh region, 72,000 people lost their jobs in 2009. Although revenue for the staffing industry nationally dipped in 2009, it grew every year since as a tightening labor market and skills gaps made such services even more in demand.
Sales reached $150 billion in 2016, nearly double the $81 billion in 2009, according to the staffing association, which represents an industry that now encompasses 20,000 companies and 39,000 offices nationwide. Staffing companies placed on average about 3.2 million employees each week in 2017, according to the staffing association.
“Companies were completely gun-shy about hiring full time,” said Chris Weiss, executive director of regional operations for the Northeast at Aerotek, the largest staffing firm in the United States.
After those painful layoffs, employers “did not want to go down that road again.”
‘Abundantly honest’ services
Workers increasingly see value in finding jobs through staffing agencies because they have incentive to find the best-paying and most secure job opportunities, said Susie Dietrich, principal of TOPS/AllTek Holdings in Plum.
Her staffing agencies, she said, bill companies for a worker’s wages for each hour on the job, with the profit margin calculated as a percentage of those hourly wages. The higher the wage and the longer someone is working, the more profit and the higher commission an individual recruiter earns.
Another benefit comes with the access, she said. With the rise of online, automated job applications, “Workers got really frustrated because they were sending their resumes into a black hole,” she said. “I can open doors for people that they couldn’t open on their own.”
During a recent tour, Ms. Dietrich pointed to a whiteboard filled with open orders sent by companies seeking workers. Dozens of recruiters in cubicles answered telephones and clacked on keyboards.
Each of her five brands oversees hiring efforts in a distinct profession: information technology, oil and gas, engineering, accounting, and light industrial manufacturing plants. Nearly all of her workers are eventually hired full time by a company after a probationary period lasting three to six months.
She wants to double the number of recruiters this year. (Yes, she is using her own recruiters to find more recruiters.)
It’s specialized work that no single degree program teaches. Beyond superb communication skills, Ms. Dietrich said, the ideal recruiter is “abundantly honest” with both workers and companies — especially with a tightening labor market and workers having the upper hand.
A company recently wanted to find a $50,000-a-year salesperson to sell construction equipment.
“That’s a purple squirrel with black-and-white spots,” Ms. Dietrich recalled telling the company. “It doesn’t exist, and I’m not going to look for it.” Instead, the job market called for a $90,000 salary and commission structure, and the company eventually changed the terms of its offering.
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While the staffing industry argues that workers gain from outsouring hiring, others say that staffing agencies have contributed to the erosion of benefits.
Wages nationally have failed to rise as much as economists expected with the low unemployment rate, and critics blame companies’ decision to go with temporary labor.
A 2014 report by the National Employment Law Project called the trend toward outsourced labor “one of the central factors driving down wages and working conditions in the post-recession economy.”
Whether people ultimately find permanent work often depends on the type of job, said Gary Schwartz, who owns and operates an Express Employment Professionals staffing agency in West View.
Express, an Oklahoma-based staffing agency with offices nationwide, places people in jobs in virtually any profession. Some jobs — janitorial services, menial blue-collar positions, seasonal jobs — are all short-term. For other, highly skilled positions, the agency recruits candidates for an open position, and a company hires them directly.
“I always tell people we’re one part of your search, [and that] we’re augmenting the job search process for people,” said Mr. Schwartz, who was laid off during the recession after 23 years in the wireless telephone industry and bought the North Hills office in 2011.
“There was a time people looked at staffing companies and said, ‘Well, that’s a last resort,’” he added. “Not so much anymore.”
Today, instead of companies having their pick of employees, many employees have their pick of companies. Unemployment in the region fell to 4.7 percent last year, down from 8.2 percent at the height of the recession.
At Aerotek, which is based in Maryland and has several offices in the Pittsburgh region, the task now is convincing its roughly 6,800 contract employees in Pennsylvania that it can find the best job for them.
“We’re courting candidates rather than sourcing candidates,” said Mr. Weiss, the regional director. “It’s a complete 180.”