Where’s the Leverage?

As we’ve noted, for several industries labor leverage only became an important indicator for staffing employment after the pandemic. For industries like health care or manufacturing, employers were pushed toward utilizing temporary services to address economic shocks stemming from the pandemic/postpandemic period. Volatility created urgency, which has since steadied in health care’s case or has dwindled even further due to economic factors in the case of manufacturing.

It’s possible that, as conditions continue to normalize, labor leverage will become a lesser factor in determining whether clients in sectors that lacked a direct correlation prepandemic bring on staffing talent in the future. A return to the prepandemic trend, however, is unlikely, as the gradual rising scarcity of workers reinforces the power of labor (especially in sectors that have always been sensitive to changes in leverage, such as professional services). This means, in the short term, that leverage will continue to struggle to increase due to economic conditions that are keeping quits low. In the long term, however, it will gradually rise in importance.

Leverage has helped determine industry leaders and laggards; it will likely do so again. In the meantime, while leverage remains on the downswing, staffing firms can position themselves as a low-risk option for employers to add headcount without committing to permanent hires.

PLANNING FOR THE NEXT UPSWING

If leverage is so important, where is it heading? While labor leverage has decreased across the board, it is unlikely to drop further as both the nonfarm quits rate and the nonfarm layoffs rate have stabilized at around 2.0% and 1.1%, respectively, throughout the last year. However, despite this stability, the severe lack of churn within the labor market has disproportionately brought down the staffing industry while the economy has continued to expand at a surprising pace (real gross domestic product grew by a historically high 4.4% in the third quarter of 2025). So, when can the industry expect a turnaround? When will leverage swing back toward staffing?

Despite current stable, if poor, conditions, labor is fundamentally scarcer now because the size of the workforce is gradually dwindling. The workforce participation rate is lower now (from 63.3% right before the pandemic down to 62.5% as of January 2026; it’s expected to erode even further to 61.4% by 2035), and as both overall job and population growth slows, this leaves employers competing for a gradually contracting pool of available labor—creating a longterm trend toward clients that are more reluctant to fire and workers who are more able to quit. That is, on paper, a winning combination for staffing, as it means the industry has its place matching talent to where it’s needed most. But it’s also important to note that, while this is an economy-wide trend, it will have sector-specific nuances.

Leverage has shown it can help explain why some staffing segments outperform while others have lagged, and it offers some predictive insight into where demand may be heading next. Firms that track leverage trends and understand their sector-specific implications will be better positioned to anticipate trends early, adapt their strategy, and ideally emerge as market leaders in the next phase of the ever-changing industry.

Max Aldrich is an economic analyst for the American Staffing Association, where he assists with producing, analyzing, and reporting on various surveys and research projects, including the monthly ASA Staffing Index, Weekly Economic and Business Outlook, quarterly ASA Economic and Staffing Forecast webinar, and the newly released ASA–LinkedIn State of Staffing report. He has a bachelor’s degree from Cornell College.

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Originally Published In

Staffing Success Magazine - March-April 2026

Traditional recruiter activity alone won’t cut it in a tough economy. The firms pulling ahead are redefining productivity—using data, technology, and sharper metrics to turn effort into results and uncover early signals of growth.

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