The US labor market is being reshaped by the rapid adoption of generative AI, the rise of part-time and gig work, and a cyclical slowdown, according to analysis by Goldman Sachs Research. AI is set to automate nearly a quarter of jobs across industries, with online job marketplaces feeling the effects as certain types of work get displaced. However, AI could also create new job categories and improve recruiter efficiency. Businesses are increasingly turning to a fractionalized workforce of freelancers, temps and gig workers to supplement or replace full-time staff.
The temp staffing market, which typically leads the broader labor market by 2-4 quarters, is showing signs of contraction. Temp penetration dipped in March, continuing a downward trend since early 2022. Job posting volumes have pulled back most in blue-collar and clerical verticals like construction, manufacturing and retail, while some white-collar verticals are showing stability after sharp declines. With hiring freezes and corporate downsizing on the rise, Goldman Sachs Research expects unemployment to increase and non-farm employment to decline over the next year.
For small and medium businesses, this shifting landscape presents both challenges and opportunities. The modularity and flexibility of work arrangements enabled by the gig economy and AI could help SMBs access talent and capabilities on an as-needed basis without the overhead of full-time employees. However, a more transient and automated workforce may also make it harder to build the engagement, culture and institutional knowledge that drives performance. SMBs will need to be intentional about how they structure work, train and invest in their people to create a sense of stability and purpose in an increasingly fluid job market.