US employment service revenues are forecast to decline 1.0% annually in nominal dollars through 2026, according to Employment Services: United States, a report recently released by Freedonia Focus Reports. The industry experienced a revenue surge in 2021 as a tight labor market and a rapidly reopening economy generated elevated levels of demand for temporary staffing services. However, the industry is projected to contract in 2022 as the labor market returns to trend. Declines are expected to reverse after 2022, as economic expansion and a tight labor market drives demand for workers in most industries. Additional factors include:

Low unemployment levels are creating a challenging hiring environment, supporting demand for employment services.
Increasing wages will support growth in fees collected by employment service firms.
Skill shortages, exacerbated by retiring baby boomers, and shifts toward more flexible workforces will encourage employment firms to offer retraining programs.
Firms with fewer than 50 full-time employees will continue to use temporary help to avoid the Affordable Care Act's (ACA) mandate to offer health insurance or face tax penalties.
However, a number of factors will continue to constrain revenues. For instance, the ACA has increased costs for staffing agencies with 50 or more employees, which places upward pressure on prices.

Employment services revenues are projected to see an 18% drop in 2022, falling from an elevated 2021 base year caused by extensive corporate spending on talent acquisition and HR services. Companies faced difficulties rehiring workers as the economy bounced back from COVID-19 restrictions in 2021. However, in 2022, more workers are expected to rejoin the labor market as extended unemployment benefits have ended and the severity of the pandemic declines. As a result, pressure on the US labor market is expected to slacken, reducing revenues for employment services.