Staffing companies are facing two competing pressures: On one hand, increased inflation has forced staffing companies to charge higher bill rates so candidates can keep pace with cost-of-living increases. On the other hand, at a time of high productivity, clients may decide not to expand headcount, which means staffing companies must price their services competitively.
Over the past six months, staffing companies have had to cope with stagnating bill rates as they engage in a delicate dance between maintaining profitability and servicing cost-conscious clients. But just like employment, bill rate trends have differed across industry sectors. For example, in the industrial sector: Concentrated labor shortages, elevated wage floors, and continued reshoring and infrastructure investments have yielded increased demand for staffing services, allowing for flexibility on bill rates. Conversely, in the officeā€“clerical sector: Bill rate gains are not an indication of increased labor demand, but of slow recovery from historic lows fueled by automation and high labor costs.
On the other hand, elevated interest rates, productivity pressures, and concentrated layoffs have led to a buyerā€™s market for staffing services within white-collar occupational segments, which has resulted in lower bill rates for technical and professional services. Plus, the elimination of pandemic-era premiums has given clients in health care more bargaining power, which has also led to lower bill rates for staffing companies in that vertical.
Staffing companies are facing two competing pressures: On one hand, increased inflation has forced staffing companies to charge higher bill rates so candidates can keep pace with cost-of-living increases. On the other hand, at a time of high productivity, clients may decide not to expand headcount, which means staffing companies must price their services competitively. At least for the rest of this year, they will need to match wages with inflation and will likely see bill rates increase between one and three percent.
However, the biggest determinant of bill rates this year will be monetary policy. Elevated interest rates are already curtailing job growth and new projects within technical and professional services, and they could also hit Industrials if sustained. Staffing companies need to maintain awareness of their market-specific exposures, and remain attentive to their pricing.
If this trend continues, the industry will likely see further gains even as overall economic conditions remain challenged.
Since December of 2025, the total civilian U.S. labor supply has fallen by 2.1 million while the total number of employed persons has decreased by 1.7 million. While both levels have declined, it does mean that total labor supply and demand are moving roughly in tandem. Moreover, the contraction in supply is slightly exceeding the contraction in demand, which has allowed the unemployment rate to remain healthy and even edge down from 4.4% in December to 4.2% in June.
While the labor market still has some warming up to do, especially in terms of total hiring and sluggish churn, labor scarcity has been growing throughout the first half of this year. The growth in the supply of both native- and foreign-born workers has been below zero year-to-year, reflecting that this decline is mainly due to lower immigration levels, accelerating retirements among domestic workers, and possibly an uptick in discouraged job seekers who have decided to check out of this job market altogether.
While some experts have expressed caution toward this last conclusion (believing the June jobs report from the U.S. Bureau of Labor Statistics will be revised), there is no doubt that for many it is especially difficult to re-enter the job market as an unemployed person. Despite these barriers, the trend toward labor scarcity is becoming increasingly prominent compared to the scarcity of demand that troubled the staffing industry last year. If this trend continues, the industry will likely see further gains even as overall economic conditions remain challenged.
