ASA works to advance the staffing industry. About ASA
The week of November 19, 2024

Weekly Economic & Business Outlook

Latest Economic Outlook
  • Productivity growth is accelerating, reversing a longstanding trend of slower growth.
  • Currently, higher productivity decreases the relative importance of labor to businesses.
  • Staffing firms should look to moderate productivity gains as an indicator of improving leverage for the industry.
Latest Staffing Research
  • CEO confidence surged in November.
  • Business leaders will look to the Trump administration to prioritize the economy.
  • Several studies have found improving sentiment among consumers about their employment prospects.

Weekly Economic Outlook

11/19/2024
Max Aldrich

Right now, businesses do not have to expand headcount by as much to increase output, depressing the need for additional labor and, by extension, demand for temporary employment services.

Max Aldrich

A New Productivity Boom?

Growth in nonfarm business sector productivity held strong at 2.2% in the third quarter of 2024, according to the U.S. Bureau of Labor Statistics. Matching the previous quarter’s growth, this continues a trend of sustained productivity growth in 2023 and 2024. While productivity has grown steadily in the U.S. since the inception of the measure in 1947, growth following the Great Recession was more sluggish than that of the 1990s and early 2000s. Growth was volatile in 2020 and slowed in 2021 and 2022 as companies sought to grow their headcounts. Not every industry in the economy is benefiting equally from recent productivity gains, however. Growth in total labor productivity is outpacing that of the manufacturing sector; the opposite had been true from 2002 to 2017.

Higher labor productivity means the economy can produce more value for the same level of input, but it also decreases the leverage of workers as higher productivity means businesses do not have to expand headcount by as much to increase output. This depresses the need for additional labor and, by extension, demand for temporary employment services.

The question remains: Can labor productivity sustain this rate of expansion? A few factors suggest the answer could be “yes.” First, new developments in artificial intelligence have the potential to lead to a revolution in productivity gains. Although it is unlikely AI is powering the current productivity growth cycle, as only a fraction of workers and businesses report utilizing these tools, it is plausible that rising AI implementation could help sustain productivity growth in the future. In addition, the continued erosion in the labor force participation rate and related labor supply shortages will push employers to utilize workers more efficiently than ever.

While questions about the increasing productivity will have on labor demand in the future still sit unanswered, staffing companies have an important role to play in bridging the gap between a tight supply of talent and employers striving for increased efficiency. Employment growth may pick up in the short term: According to the CEO Confidence Index from Chief Executive, 59% of companies expect to increase headcount in 2025 (up from 41% just a month ago.)


Labor Productivity (Index: 2017 = 100)

Labor Productivity (Index: 2017 = 100)
Source: U.S. Bureau of Labor Statistics

Weekly Staffing Research Outlook

11/19/2024

Renewed optimism is fueling expectations of economic growth, with companies and individuals adjusting their outlooks accordingly.

Tim Hulley

Surveys Show Increasing Confidence in the Labor Market

Several recent surveys show growing confidence among business leaders and consumers alike amid drivers such as cuts to interest rates and clarity about election outcomes. This renewed optimism is fueling expectations of economic growth, with companies and individuals adjusting their outlooks accordingly.

As noted in this week’s WEBO, the latest CEO Confidence Index from Chief Executive (fielded Nov. 6–9) found a dramatic increase in the share of companies expecting to increase hiring in the next 12 months. This comes as three-quarters expect to grow revenue in 2025, and more than two-thirds expect to grow profits in the next 12 months. With a new administration coming in, the economy tops the list of policy areas CEOs would like to see prioritized (70%).

Consumers also exhibit higher confidence, particularly in their labor market prospects. Last month’s Federal Reserve Bank of New York Survey of Consumer Expectations found the average perceived probability of losings one’s job among consumers eased 0.3 percentage point to 13.0%, and the perceived probability of finding a job (if one’s current job was lost) rose 3.3 percentage points to 56.0%, which is the highest reading in a year. The Conference Board Consumer Confidence Index found a similar result: Only 16.8% of consumers said jobs were hard to get, down from 18.6% in September; 35.1% said jobs were “plentiful”—up from 31.3% in September.

While these indicators have yet to translate into solid gains in the staffing industry, this broad-based improvement in sentiment is a positive sign that the labor market could be more active in 2025.


% Expecting Growth Over the Next 12 Months

% Expecting Growth Over the Next 12 Months
Source: Chief Executive, “November CEO Confidence Index”

Economic Calendar

Real Time Economic Calendar provided by Investing.com.
Staffing in 60 Seconds
Past Issues
Loading Issue...
Meet the Research Team
  • Noah Yosif
  • Tim Hulley
  • Max Aldrich
    Max Aldrich
Suggested For You