The State of Staffing || Season 1 Episode 9

What are the major macroeconomic factors shaping the staffing industry, particularly in light of the upcoming U.S. election?

In this episode, the team discusses the state of staffing and where the market is heading at the end of 2024 and into the beginning of 2025. 

If you like the Now Hiring! podcast, we think you'll enjoy our newsletter, also called Now Hiring! You can sign up for the newsletter here. 

Transcript

Andy Weiss (00:01.09)
Greetings friends and welcome to Now Hiring! Our podcast about trends in staffing, recruiting and talent. I'm Andy Weiss, CMO of Ceipal and I'm joined as always by Ceipal's founder and CEO, Sameer Panakalapati. 

And in this episode, we're recording it as we sit awaiting maybe an interest rate cut. We've got a pending election in the US. We had a recent jobs report that had better than expected or improvement of new jobs in August over July. So interest rates and unemployment and all these things kind of smear on people's minds and an election coming up. 

As you look at the state of staffing and recruiting, particularly in IT and general staffing, of where's your head at? What are you seeing? What are you feeling? What do you feel like the pulse is of the market today?

Sameer Penakalapati (01:01.898)
Yeah, I hear a lot and I, you know, we get to know people talk about it, like when this gets better or when this gets turned around to be a better. But I think I always talk about it, hear about it saying we're in a perfect storm right now. Right. One, obviously, the biggest of all is the high interest rates environment. 

which obviously generally, know, the spend on IT projects or IT enhancements are kind of slowed down. That's a one, right? That's a big one. And the second, the impact of AI on existing systems and processes. So I'm talking about every market industry or the companies looking into

Hey, what is the AI impact on my business and on to my industry? Right. And yeah.

Andy Weiss (02:03.522)
Yeah, because we're seeing like with some of the layoffs that were announced in August, we're seeing AI kind of replacing financial performance is the reason for these layoffs, whether that's, you know, the reality or not, it's definitely on leadership's mind and on on the minds of the rank and file kind of employees, like what do I do and stuff? So yeah, it's definitely a hot topic.

Sameer Penakalapati (02:27.172)
Yeah, like a boards are coming and asking their CIOs, CTOs and their CEO saying, we hear a lot about the AI and the disruption. How is that impacting our industry? How is that going to impact our business? And is there anything that we can lever the these AI advancements so that we can be more efficient running our business? know, it's everybody's just talking about. So the

And then the CIOs and CTOs and their budgets are, know, portion of that is going really towards about exploring AI and their use cases of AI. There's a lot more happening around, okay, you know what, let's hold what we are and let's just look into what AI can do it. And maybe there are a few new systems or different platforms, maybe platforms to upgrade that we can take advantage. 

So everybody's into that thought of actually just exploring the AI. So that is also kind of slows down the IT spend a little bit. So it's like high interest rates, the impact of AI, and then obviously, every time you go through, especially the United States, you go through election year, the second half of the election year.

It's intense. It's a distraction. People talk about different things and, you know, so that's all three. It's a perfect combination. It's like I call it a storm. That perfect storm. We're all here. 

That's what we're going to do it. I think once we get into 2025, the elections over the you know, I think the people are learning lot about the AI impact into their industry, how they can lever the AI and what their boundaries of the applying AI at this point in time. And also on top of that, a lot of regulations coming around AI. So they'll also be mindful of that. So all of that, I think, gets some clarity by mid next year.

Andy Weiss (04:35.872)
Okay, I want to kind of go, want to two things. One, what I've got a question for you about kind of the interest rates and I want to come back to some of the the regulatory components as well. on the interest rates, so the expectation is, hey, the the in the US, the Fed is probably going to lower interest rates in their September meeting. That's the expectation. So but from a reality standpoint, like as a as a as a business operator,

how quickly, if the interest rates are lowered, how quickly are things gonna change? Or is this just, back to your perfect storm, is this just one of the things that needs to change to start kind of getting people feeling more positively about hiring and growth?

Sameer Penakalapati (05:24.784)
Yeah, look, everybody wants to see, including myself, the flip over the switch and start doing a great economy and starting in October. That's not happening. Right. That's reality. So the reality, the reality is, you know, it's the interest rates reduction. I think the most likely expected, I think it's September 17th, right. Meeting and they're expecting widely expected is 25 basis points, which is quarter percentage of the interest rate reduction. But if some miracle happens, it's maybe go to 50 basis points, a half percent reduction, which is nobody knows about it. So whatever the situation, right, it's really a small dent. That's it. It's not going to make a big dent, right?

Andy Weiss (06:08.354)
Yeah. It's not the magic wand or anything like that. So given that, yeah, yeah, yeah.

Sameer Penakalapati (06:13.744)
Let me say another one, right? So it's just a little bit 25 to 50 basis points. It happens. But I think the mood that, that, okay, now we are here, we're seeing the downward trend on interest rates. I think the sentiment of that might be also very helpful just because, you know, that we have been seeing last three years, this only the interest is going up.

Now we're seeing the downtrend. I think that would have a positive and maybe a favorable attention of the markets. again, in a large scheme of things, it is not going to make a big dent for either 25 basis points or 50 basis points of interest rate reduction. It's not a quick, fixed thing.

Andy Weiss (07:04.078)
So given that it's not a quick fix, while we think it may happen, it's not a quick fix. Operational efficiency is kind of always important, but particularly during kind of this perfect storm, as you describe it, it's like probably becomes even more important. So what should or what can IT staffing firms do to strike this balance between kind of being

financially responsible or cost cutting and also kind of planning for growth and strategic investments, maybe AI or some other technologies or other things that they're thinking about and may have put off. How do they balance that?

Sameer Penakalapati (07:50.512)
The staffing forms, obviously we are seeing a tremendous amount of margin pressure on any type of sector, be it IT, engineering, healthcare, light industrial, all of those runs on really tight squeeze margins. On top of that, the cost also tremendously went up because of these regulations like, you know, is an enormous amount of regulations is federal and state level and county level is just, you know, and, and that just not going to stop, right? So it's only going to go get worse. So the cost of managing the compliance is an expensive too, on top of everything that's happening. So the, so how do we address this, right? Like it's just one firm problem. It's everybody's problem.

So definitely the way to do is, how do you reduce your costs? How can you get more with less, right? Automation is probably the best, brightest spot at this point in time for staffing industry, right? Is your recruitment operations are automated? Or at least a majority of those are automated by enhancing your existing ATS, workforce platforms. 

And then you're also automating lot of your back office operations through your workforce platforms, through your integrated systems and your suppliers management through your integrated VMS platforms. All of that really, you you have to have an absolute, you know, deployment of great systems that automates your front office, back office of hiring people, right?

Andy Weiss (09:42.286)
So it sounds like you may be experiencing maybe a little bit of a slowdown. so use this time kind of as an opportunity to take a look at your processes, your systems, your technology and investments and look at kind of creating some, are there ways that you can automate stuff so that basically doing the things that

You don't, you may not have the time to tackle when you're ultra busy and wish you had this stuff in place. Like now's the time to kind of maybe do some of that spring cleaning, if you will.

Sameer Penakalapati (10:24.022)
Yeah, actually the tech enhancements and the tech adoption not only help you to reduce your overall costs in the business, but also puts you ahead of your competition in terms of winning more business, right? It's a doublet sword actually doing it. And if there's any time, this is the time for our staffing firms to really upgrade their tech.

and enhance and utilize the AI capabilities that brings these tech platforms. I'm just really looking to the holistically, their front office and back office. And because that's where the most cost for staffing firms, apart from the payroll and other things. I would say automation, tech adoption, tech consolidation, some of those biggest things that staffing firms actually can take advantage of.

and then still be profitable and still be competitive compared to your competitors. Because if you don't adapt and somebody else will adapt and they can able to produce better build rights than you, then you would lose the business to your competitors. So I think tech plays probably more significant role today than ever in the past.

Andy Weiss (11:40.77)
So I think, Sameer, you just teed up maybe our next episode. So for all of the listeners, please be sure to check out our other episodes for Now Hiring!, both on Spotify and on YouTube. We also have a newsletter, and I'd like to invite you to join or extend the conversation on our new Slack channel for Now Hiring! So coming up, we've got another episode on AI and technology.

And in the meantime, we'll see you on the flip side. Take care.