Welcome to part two of our series, The State of Staffing. In case you missed it, last month we dove into the truth about IT demand. Now, we’re going to take a closer look at the light industrial vertical to understand shifts in demand and where you can look to diversify your strategy.
While traditional sources for light industrial staffing companies aren’t as fruitful as they were during the pandemic’s heightened demand, there is opportunity to be found elsewhere. By shifting perspective and looking at the data, there are usually possibilities for growth and adaptability.
We can see the path forward by understanding how light industrial demand got to where it is today.
During the pandemic, a significant amount of money was given to consumers to try and keep the economy moving. Spending options during this time were largely limited to consumer durable goods, like home project building materials, workout equipment, and appliances. With this demand, manufacturers’ new orders rose 21% from pre-pandemic levels. These goods not only had to be manufactured, but shipped, stored, and distributed. However, many people had dropped out of the labor force, so there weren’t enough workers to make the goods or handle the transportation of those goods.
Light industrial staffing companies were facing the same conditions that IT staffing companies experienced during Y2K; excessive demand, and very little supply. Many staffing companies attempted to solve this problem by hiring more recruiters to try and find a limited supply of workers. Pricing and margins were growing, so the pain of the increased cost of internal hiring was pushed into the future.
Now, the future has arrived. New orders are returning to their historical trend line. Inventories once stuck in overflow warehouses have moved on to storefronts or to the consumers themselves. Shipping volumes are normalizing, but normal feels different because companies have adjusted to handle abnormal demand.
This correction in new orders needs to occur as demand returns to more realistic expectations, and this means some current pains for light industrial staffing. But, the future is bright as persistent labor shortages will continue to positively impact attainable margins. So, how do you navigate the present until those days return?
There are two things light industrial staffing companies should know:
Diversifying your staffing business can limit current and future pains during economic cycles.
Labor shortages are here to stay, so resist the temptation to accommodate clients who expect reduced prices.
Look for demand in other sectors and diversify your business.
One of the occupations that most benefited from the excessive demand for durable goods was Laborer and Freight, Stock, and Material Handlers (SOC 53-7062), more commonly known as Warehouse Workers. Job postings for this occupation more than doubled between 2020 to the middle of 2021. But, declining postings over the last year have lowered demand back to their pre-pandemic trend levels. Notice here, that they are now back to their prior level, not below.
Let’s take a deeper dive into Warehouse Worker demand:
Warehouse Workers primarily exist in several industries such as manufacturing, where demand has decreased by over 20% in the past year and, naturally, transportation and warehousing that saw a more dramatic decrease of almost 48%. On the bright side, postings recently jumped from April to May of this year. And other industries hire these workers as well. For example, when we observe postings for Warehouse Workers in retail trade, we see them returning to similar levels from a year ago and, interestingly, postings recently jumped by nearly 80% from February to April of 2023.
Let’s return to manufacturing, and specifically look at non-durable goods industries, like food and beverage manufacturing. These industries are less susceptible to business cycle fluctuations, and demand for Warehouse Workers has stayed relatively the same over the last year. Food still needs to be harvested, shipped to processing centers, transported to cold storage warehouses, and delivered to grocery stores and restaurants.
It’s not only the occupations, but the workers themselves who are adaptable to new occupations and new industries.
So far, we’ve discussed Warehouse Workers thinking of them as a specific occupation. But we can also think of the core skill sets a Warehouse Worker has, and then find related occupations that could employ someone with those skill sets. Many light industrial roles and their skills are very transferable between different occupations if you know where to look.
Light industrial postings are still at higher levels than they have been historically.
Despite postings for the top occupations of light industrial staffing having fallen by a third since their peak in April of 2021, our current data still showed a considerable share of postings in May of this year. And these postings are well above historical levels for these light industrial occupations.
Several industries that use light industrial staffing services are experiencing high volume in demand.
Since January, professional services, durable goods wholesalers, and nondurable goods wholesalers have each had over 30,000 postings for top staffed light industrial roles. In May alone, there were nearly 9,000 postings in the professional and technical services sector, which is the same level as during the height of the pandemic. Current demand for these workers in the durable and nondurable wholesale sectors, as well as real estate, are all above historical levels.
Although demand is changing, there is still a worker shortage, so don’t compromise your pricing.
While demand may have fallen in some industries, pricing hasn’t. The limited workers available are still receiving the same compensation, or more, than they were when demand for their labor was abnormally high. Advertised wage for Warehouse Workers is over $17/hour and has increased by 17% since May of 2020. For our top occupations in light industrial staffing, the median advertised wage is over $18.50/hour, growing by 30.7% over the last three years. In the professional services industry, these occupations demand over $19/hour.
As a staffing company, it’s important to watch how demand is shifting and be agile to diversify.
What worked over the last two years won’t necessarily work in the next two. Light industrial workers are necessary for every industry, so look to the ones where their services will always be needed. For example, food and beverage manufacturing, pharmaceuticals, and manufacturing sectors who participate in government projects (e.g. defense or school supplies). You can also look to industries who are experiencing heightened demand, like logistics and the supply chain just did. Staffing companies who observe job postings trends, consciously diversify as industry demands change, and know how to price appropriately will be more resilient and adaptable.
