The surge in US job numbers is significantly driven by the healthcare sector, with 70,000 jobs added in January, constituting nearly 20% of the overall workforce expansion. This hiring trend is expected to persist throughout the year due to a structural shift post-pandemic. Hospitals are transitioning from relying on temporary staff, necessitated by the peak of Covid-19, to a more permanent workforce as normalcy returns.
This workforce restructuring is beneficial for healthcare providers, reducing reliance on costly contract workers like traveling nurses. However, publicly traded staffing companies that supplied these contract workers may face challenges with this shift.
During the pandemic, healthcare staffing, including travel nurses, tripled, with a significant surge in costs. For instance, hourly rates for temporary nurses nearly doubled from pre-pandemic levels. As hospitals pivot to a larger permanent workforce, the use of expensive contract workers is diminishing, impacting the temporary staffing sector.
Despite the shift, there remains a need for additional healthcare staff due to robust patient volumes, postponed procedures during the pandemic, and the growing demand from aging baby boomers. However, some of the nurses who traveled during the pandemic did not return, leaving certain regions understaffed.
Additionally, there is a declining interest in nursing careers, as indicated by a decrease in enrollment in nursing programs. To address the increasing demand, hospitals are enhancing their permanent workforce while reducing reliance on contract workers. This shift has resulted in significant cost savings for some healthcare providers.
While rates for temp nurses have declined, they still charge about 20% more than pre-Covid levels, making permanent staff more cost-effective. Some hospitals are creating in-house temporary staffing solutions or float pools to manage future needs efficiently.
The change in staffing dynamics is reflected in the stock performance of major healthcare staffing agencies, such as AMN Healthcare Services and Cross Country Healthcare. Both stocks have experienced significant declines since late 2022, signaling a market reset in response to the shift away from temporary healthcare staffing.
Despite challenges faced by staffing agencies, they are adapting to the changing landscape by focusing on temporary physician staffing, which is expected to grow in the coming years, providing a potential avenue for recovery in the healthcare staffing sector.
