High Costs and Tight Labor: Will 2023 Buck the Trend?

High costs and tight labor: these two issues dominated nearly every client conversation I had during my first year at AgileOne. Of course, they are interrelated. As the economy reopened during the second chapter of the pandemic, the workforce solutions industry roared back at the pace of an Olympic sprinter. With businesses scrambling to meet red-hot demand, they paid a premium for workers, pushing wage growth to levels beyond historical compare. Combined with disruptions in the supply chain, this led to record-setting inflation in corners near and far. And now, we’re all holding our collective breaths for what comes next.

No one has a crystal ball. But, relying on the latest data and trends, we can make calculated decisions about how to approach our work this year. That’s the objective of AgileOne’s Workforce Solutions Market Overview: March 2023 Edition. This report combines the latest economic data and insights from around the world with leading solutions to help companies navigate the ups, downs, and in-betweens of today’s complex, changing marketplace.

Across many industries, hiring remains strong

Entering 2023, the job market continues to defy the odds, with the economy recording roughly 1.7 job openings per every unemployed individual.

Even though hiring saw a steady decline throughout 2022, with companies hiring roughly 670,000 fewer employees in December compared with a peak in the month of February, hiring for the year tracks well ahead of the period prior to the COVID-19 pandemic.

Yet, if you follow the news closely, you might think we’re in a spiral. There’s persistent chatter of a recession — or, at least, an economic rightsizing — caused in no small part by the Fed’s efforts to tame inflation by raising interest rates. Then, there are stories from industries like big tech, where more than a thousand companies laid off an estimated 162,000 employees in 2022. But, as our report shows, hiring rates at the end of 2022 actually eclipsed the period just prior to the pandemic across many industries, with the manufacturing, construction, and financial services sectors seeing the greatest jump.

The unemployment rate continues to surprise, too. In January, it reached a 53-year low of 3.4 percent, bolstered by growth in the leisure and hospitality, professional and business services, and healthcare sectors. Should a recession happen, unemployment is likely to peak at 4.5 percent — roughly one percent off its low — more indicative of a rightsizing in the economy than the kind of sharp downtown that has defined recessions in recent decades.

In unpredictable times, AgileOne is at your side

No matter where we’re headed next, one thing is clear: companies that approach their work with agility will be in the strongest position to succeed. This begins with hiring a flexible workforce, like the ones facilitated by AgileOne. When the economy contracts, companies can deploy temporary — or contingent — workers to maintain scaled-back staffing levels without the added cost of severance pay. Once the economy begins to recover, rapidly deploying a contingent workforce allows companies to quickly scale up their operations, testing different skills without committing to a more permanent employment arrangement.

That’s why a growing share of companies are hiring contingent workers, which are predicted to comprise up to 50 percent of the U.S. workforce by 2050.

AgileOne can also help companies streamline their operations, which can cut costs. Our total talent management solutions bring together permanent and temporary employees under one umbrella, offering a strategic, holistic approach to an organization’s workforce fulfillment needs that integrate a singular model inclusive of multiple worker types. Using our state-of-the-art reporting, companies can gain visibility into their entire workforce with total talent management, enabling them to staff efficiently.

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In rapidly changing times, AgileOne is at your side.

We are the one workforce solutions provider to offer comprehensive solutions leveraging the best of the best, combined with our technology expertise, consulting services, and exceptional delivery teams to meet all your talent attraction and management needs.

Here are five solutions we’re recommending for companies of any size or scope to navigate today’s evolving labor market:

1. Hire flexibly with contingent labor. In times of transition, contingent labor provides companies with the flexibility to adjust to reduced demand during economic contractions while allowing them to quickly scale up during recovery.
2. Streamline with total talent solutions. AgileOne's total talent management solutions offer a strategic approach to managing all categories of workers with a singular model supportive of an organization's workforce fulfillment needs. This allows companies to streamline their operations and weather any conditions.
3. Diversify your workforce. Employers who hire nontraditional candidates — or "hidden workers" — benefit from a larger and more diverse talent pool. Furthermore, women and minorities in leadership positions have been shown to outperform their peers on profitability, strengthening the business case.
4. Build the ultimate worker pipeline. By leveraging talent communities — or groups of interested candidates who are not yet ready to commit — companies can focus on building a pipeline of quality workers until the right time for both parties.
5. Double down on culture. In an era of historic labor market tightness, companies that prioritize a human-centered approach will be in a stronger position to retain employees. Proven strategies that improve company culture include embracing flexible working arrangements and supporting opportunities for learning and career advancement.

Download AgileOne’s Workforce Solutions Market Overview, March 2023 Edition.