iEXPERT RISK REPORT 56131

Employment & Recruiting Agencies in

the US

September 2020

IBISWORLD.COM 1-800-330-3772 INFO@IBISWORLD.COM

Employment & Recruiting Agencies in the US September 2020

COVID-19 IBISWorld's analysts constantly monitor the industry impacts of current events in real-time – here is an
(Coronavirus) update of how this industry is likely to be impacted as a result of the global COVID-19 pandemic:
Impact Update
· Employment and Recruiting Agencies industry revenue is expected to decline in 2020 as reduced
corporate profit and business sentiment have reduced demand for permanent employees. For more
information, please see Current Performance chapter.

· Demand from certain markets is expected to decline in 2020 due to cost saving measures and social
distancing practices. For more information, please see the Major Markets chapter and Demand
Determinants chapter.

· COVID-19 (coronavirus) can be viewed as an external threat to this industry as it is preventing

companies from operating at full capacity. For more information, please see the Basis of Competition and
Demand Determinants chapters.

Note: The content in this report is currently being updated to reflect the trends outlined above.

Snapshot Total Revenue Annual Growth Annual Growth

2020 2015-2020 2020-2025

$18.8bn -2.2% 3.7%

Profit Margin Wages as a share of Revenue Number of Businesses
2020 2020 2015-2020

4.2% 53.3% -1.8%

Industry Structure Level Trend Level Trend

Life Cycle Mature Regulation Level Medium Steady

Revenue Volatility High Technology Change Medium

Capital Intensity Low Barriers to Entry Low Steady

Industry Assistance Low Steady Industry Globalization Low Increasing

Concentration Level Low Competition Level High Increasing

IBISWORLD.COM 2
Employment & Recruiting Agencies in the US September 2020

Key Industry Data

Products & Services

Segmentation

IBISWORLD.COM 3
Employment & Recruiting Agencies in the US September 2020

Major Players

Cost Structure

IBISWORLD.COM 4
Employment & Recruiting Agencies in the US September 2020

Industry Performance
Industry Performance The Employment and Recruiting Agencies industry has not performed well over the five years to 2020
due to a collapse of the labor market in 2020, which has reduced demand for recruiting and job
placement services.

The COVID-19 (coronavirus) pandemic has severely hurt the economy and industry performance in 2020.
The pandemic is expected to cause the national unemployment rate to increase 179.8% in 2020. Cost
saving measures by companies in this time of economic uncertainty has resulted in almost 45.0 million
people filing for unemployment benefits since March 2020. Overall, industry revenue is projected to
decrease an annualized 2.2% to $18.8 billion over the five years to 2020. In 2020, revenue is expected to
decline 31.0% as decreases in corporate profit and business sentiment reduce demand for permanent
and executive placement services.

Industry performance is dependent on the national unemployment rate, corporate restructuring activity
and overall demand for permanent new hires. The national unemployment rate has shot up in 2020,
reflecting poor economic conditions. Technological development has had a major effect on industry
structure, with online profiles and job listing platforms creating opportunities for new businesses.
Meanwhile, larger operators have adopted online services to increase the efficiency and accuracy of
candidate selection and interviewing. Combined, these trends had helped industry profitability expand
prior to the pandemic in 2020. Industry profitability is expected to decline in 2020 due to a decrease in
overall demand in the economy as companies and consumers are trying to be frugal during times of
uncertainty, thus industry operators are unable to maintain high profit.

Over the five years to 2025, the industry is expected to benefit from an anticipated recovery of the
economy and labor market. After the pandemic in 2020, the economic recovery is expected to cause the
national unemployment rate to decline, improve business sentiment and increase corporate profit.
Companies are expected to be encouraged to engage in new hiring and restructuring after an economic
crisis. Profit is expected to rebound in 2021 and increase as demand for industry services is expected to
increase as companies look to hire. Companies in the industry are expected to try focusing on offering
higher-profit services. IBISWorld expects industry revenue to increase an annualized 3.7% to $22.5 billion
over the five years to 2025.

Industry Issues Threat

The national unemployment rate measures the proportion of Americans aged 16 or older who are
currently unemployed and looking for work. An increase in the unemployment rate represents declining
demand from businesses for employees and, therefore, reduces the number of placements available
along with industry revenue. Conversely, stronger employment opportunities boost total revenue. The
national unemployment rate is expected to increase, posing a potential threat to the industry.

Opportunity
Operators in this industry compete with companies that manage their own recruiting, usually through
online job portals and listings. Additionally, the industry competes with temporary employees that
mitigate demand for permanent placements. External competition for the Employment and Recruiting
Agencies industry is expected to decrease in 2020, presenting a potential opportunity for the industry.

IBISWORLD.COM 5
Employment & Recruiting Agencies in the US September 2020

Call Preparation Questions

Role Specific Sales & Marketing
Questions
Does your company specialize in a niche service or bundle its services to attract clients?

The average staffing agency provides recruiting for a specific industry or line of business based on their
in-depth knowledge of the industry.

How do you market your services to potential clients?

Permanent recruiting agencies market their skillset to potential customers by demonstrating over a long
period of time their ability to provide companies with successful candidates.

Strategy & Operations

Does your company target a particular market segment, or provide for a broad range of markets?

It is in most recruiting agencies best interest to limit themselves to applying highly qualified candidates
to an industry they have a wide array of connections in.

Is maintaining repeat or recurring customers vital to your company's success?

By securing contracts to staff permanent employees on a recurring basis, agencies can mitigate some of
the seasonality they experience.

Technology

Are web-based technologies, such as online document storage and video conferencing hurting your
business?

Video conferencing and other web-based technologies are helping recruiting agencies, as it increases
their ability to interview candidates from anywhere. This leads them to provide businesses with better
candidates that get paid more.

Does your company use mobile applications to improve client services and consumer experience?

Mobile applications have completely revolutionized the way recruiting agencies look for qualified
candidates to place due to their ability to reach candidates anywhere.

Compliance

Is your business responsible for safeguarding customer information?

Since recruiting agencies collect professional and personal information from candidates, ensuring the
security of their information is vitally important in order to remain credible.

Is obtaining state certification or licensing necessary for your business?

The largest regulatory hurdle recruiting agencies must surpass are state-specific licensing requirements.
Aside from them however, there are little other regulatory burdens.

Finance

How frequently does your company purchase new equipment?

Recruiters require relatively little capital in order to operate, leading equipment purchases to be
infrequent.

How does your company compensate for seasonality of cash flow?

Some recruiting agencies will begin providing workers in a variety of fields in order to mitigate
seasonality in any one field.

External Impacts Impact: External competition for the Employment and Recruiting Agencies industry
Questions How can you better promote your services to job searchers? Do you have placement rates that you can
highlight?

IBISWORLD.COM 6
Employment & Recruiting Agencies in the US September 2020

Operators in this industry compete with companies that manage their own recruiting, usually through
online job portals and listings. Additionally, the industry competes with temporary employees that
mitigate demand for permanent placements.

Impact: Number of businesses

Do you notice demand fluctuations when the number of businesses increases or decreases? How do you
track these fluctuations?

An increase in the number of businesses increases the need for new workers, which boosts demand for
industry-relevant services, such as online job listings and candidate profiling.

Impact: National unemployment rate

How do you market your services in times of low unemployment? How do your recruiting tactics differ?
Do they change when unemployment increases?

An increase in the unemployment rate represents declining demand from businesses for employees and,
therefore, reduces the number of placements available along with industry revenue.

Internal Issues Issue: Ability to quickly adopt new technology

Questions What is your budget for research and development? How easily can you adopt new technology? How do
your capabilities compare with rivals' capabilities?

Keeping up to date with new technology, particularly the use of the internet portals for information on job
vacancies and resume screening by employers, is vital for success in this industry.

Issue: Providing client confidentiality

How do you assure your clients that you will protect their privacy? What measures do you have in place to
provide confidentiality to your clients?

It is important to ensure total confidentiality in all areas of operation and in all dealings with clients and
potential placements. This factor is particularly important for executive search firms.

Issue: Access to highly skilled workforce

Do you provide ongoing training for your employees? How do you ensure you are hiring highly qualified
employees?

Firms should hire talented and amiable workers who can seek out the best potential candidates for a job
and negotiate effectively between clients (employers) and job candidates.

IBISWORLD.COM 7
Employment & Recruiting Agencies in the US September 2020

Industry Risk Summary

Risk Rating Barometer

Overall Risk Rating Overall risk in the Employment & Recruiting Agencies industry is forecast to be HIGH over 2021. The
Analysis primary negative factors affecting this industry are high competition and low barriers to entry. Overall risk
will be slightly higher than the previous year, a result of unfavorable movements in national
unemployment rate as well as number of businesses. However, their impact will be partially offset by a
projected fall in growth risk.

Risk component Weight Score

Structural risk 25% 6.49

Growth risk 25% 5.47

Sensitivity risk 50% 6.89

Overall risk 6.43

Structural Risk Level Trend Score Weight Weighted Score

Analysis Barriers to Entry Low Steady 9 13% 1.17

Competition High 9 20% 1.80

Industry Exports Low Steady 1 7% 0.07

Industry Imports Low Steady 2 7% 0.14

Level of Assistance Low Steady 7 13% 0.91

Life Cycle Stage Mature 5 20% 1.00

Volatility of Industry High 7 20% 1.40

Overall Structural Risk Score 6.49

Structural risk will be high in outlook period

Structural risk will be HIGH over the outlook period. This industry struggles with high competition.
Businesses competing for market share must incur expenses to differentiate offerings or keep prices low
to entice demand. This results in greater likelihood of declining revenue and lower profits. Operators are
exposed to high revenue volatility. This requires prudent cash flow management and planning in times of
uncertain demand. Businesses failing to account for these challenges risk sudden losses or diminished
margins. A concern for this industry is the low barriers to entry. This enables new players to easily enter
the marketplace and heighten competition. Fierce competition heightens risk by placing downward
pressure on prices and profit margins.

IBISWORLD.COM 8
Employment & Recruiting Agencies in the US September 2020

Growth Risk Growth Component Revenue Growth Score Weight Weighted Score
Annualized growth -16.42% 9 25% 2.25

Forecast growth 5.82% 4.29 75% 3.22

Overall Growth Risk Score 5.47

Growth risk is forecast to be medium - high in outlook period

Growth risk is expected to be MEDIUM-HIGH over the outlook period. IBISWorld forecasts that annual
industry revenue will grow 5.8% to $19.9 billion. In comparison, revenue shrank 16.4% per year between
2018 and 2020.

Sensitivity Risk Sensitivity Component Score Weight Weighted Score

National unemployment
6.87 35% 2.41
rate

Corporate profit 6.35 30% 1.90

Number of businesses 6.90 20% 1.38

External competition for

the Employment and
8 15% 1.20
Recruiting Agencies
industry

Overall Sensitivity Risk Score 6.89

Sensitivity risk is forecast to be HIGH over the outlook period, up from MEDIUM-HIGH in 2020. The two
factors with the most significant impacts on the industry are national unemployment rate and corporate
profit. When there is a rise in National unemployment rate, risk will fall; where a rise in, Corporate profit
will cause industry risk to increase.

National unemployment rate: The national unemployment rate measures the proportion of Americans
aged 16 or older who are currently unemployed and looking for work. An increase in the unemployment
rate represents declining demand from businesses for employees and, therefore, reduces the number of
placements available along with industry revenue. Conversely, stronger employment opportunities boost
total revenue. This factor's contribution to risk is expected to decrease in the coming year.

Corporate profit: Corporate profit measures profit across all industries, not just the Employment and
Recruiting Agencies industry. An increase in corporate profit boosts available salary budgets and
increases business confidence, which encourages operators to hire more staff, particularly on a
permanent basis rather than on temporary contracts. Corporate profit is expected to decrease in 2020.
This factor's contribution to risk is expected to decrease in the coming year.

Number of businesses: The number of businesses measures the total number of companies in the United
States with at least one employee. An increase in the number of businesses increases the need for new
workers, which boosts demand for industry-relevant services, such as online job listings and candidate
profiling. The number of businesses is expected to decline in 2020. This factor's contribution to risk is
expected to increase in the coming year.

External competition: Operators in this industry compete with companies that manage their own
recruiting, usually through online job portals and listings. Additionally, the industry competes with
temporary employees that mitigate demand for permanent placements. External competition for the
Employment and Recruiting Agencies industry is expected to decrease in 2020, presenting a potential
opportunity for the industry. This factor's contribution to risk is expected to remain the same in the
coming year.

IBISWORLD.COM 9
Employment & Recruiting Agencies in the US September 2020

Risk Score Context

IBISWORLD.COM 10
IBISWorld helps you find the industry
information you need – fast.

With our trusted research covering thousands of global industries, you’ll get a quick and intelligent
overview of any industry so you can get up to speed in minutes. In every report, you’ll find
actionable insights, comprehensive data and in-depth analysis to help you make smarter, faster
business decisions. If you’re not yet a member of IBISWorld, contact us at 1-800-330-3772 or
info@ibisworld.com to learn more.

DISCLAIMER
This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use by its authorized licenses strictly in accordance with
their license agreements with IBISWorld. IBISWorld makes no representation to any other person with regard to the completeness or
accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability
which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from the use
of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Inc. The
publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers
own purposes. In the event that the purchaser uses or quotes from the material in this publication – in papers, reports, or opinions
prepared for any other person – it is agreed that it will be sourced to: IBISWorld Inc.