HUMAN CAPITAL MANAGEMENT M&A MARKET DYNAMICS
The second quarter of 2025 has demonstrated the anticipated impacts of continued economic uncertainty on the Human Capital Management industry, with the market remaining stagnant amidst dynamic trade restrictions and geopolitical tensions. The staffing market proves resilient despite continued headwinds, with commercial staffing hours on an upward trajectory and popular outsourcing services such as SOW consulting and independent contractors contributing to a mostly stable market size at the year’s midpoint.
M&A transaction volumes remained strong, posting a second consecutive quarter in the triple digits and remaining in line with Q2 2024. Energetic dealmaking activity across North America is a strong indicator of the staffing industry’s perceived potential as macroeconomic headwinds begin to subside. Trading multiples also remain strong, demonstrating further confidence in a market rebound as early as 2026.
What We’re Discussing With Clients
Trends in Staffing Hours Vary by Segment
U.S. Staffing hours are down ~3% compared to Q2 of 2024, with both commercial and professional staffing hour declines contributing to that figure. On the bright side, hours worked in late Q2 are at their peak in 2025, surpassing the previous highs recorded in February and March. Overall, commercial staffing has shown modest growth across 2025 while professional staffing has declined in terms of hours over the same period. While fears of a recession have eased, payroll growth has trended downward over the past six months, indicating a weakening labor market. Despite headwinds faced in professional staffing, the appetite for commercial staffing remains strong as heightened uncertainty drives the need for a flexible workforce, enabling for quick pivots in strategy in today’s dynamic environment.
Stalling Economic Growth Driven by Uncertainty
The U.S. economy is facing a period of deceleration due to aggressive and dynamic trade policies, fiscal instability, and continued disruptions to the labor market. Tariffs, for example, which are currently around a 15% effective rate, are increasing costs across trade-related sectors and inhibiting temporary staffing hours growth as a result. While U.S. economic and political uncertainty has subsided somewhat since Q1 of 2025, it remains a direct influence on the state of the economy as geopolitical tensions have yet to ease. Experiencing similar volatility, the strength of the labor market has been dynamic throughout the year and is not expected to last as both unemployment and inflation are on pace to exceed a 4% seasonally-adjusted annual rate by year-end.
Subtle Bounce Back Anticipated in 2026
Industry experts remain optimistic that some degree of bounce back is likely in 2026, primarily driven by the stabilization of U.S. policy following a turbulent 2025. A conservative 2% growth in the U.S. Staffing market size is predicted for next year, with a similar trajectory assumed for 2027-2030. Annual wage growth in temporary staffing, paired with the growth of outsourcing services such as SOW consulting, independent contractors, and staffing platform technologies, is anticipated to offset volume declines in staffing hours. GDP growth, which is anticipated to remain between 1-2% in 2026, is another indicator of the subtle growth forecasted across the Human Capital Management space as the U.S. labor market begins to stabilize.
