Economic & Employment Outlook
The IT and engineering staffing landscape continues to navigate a complex economic environment. Mark Roberts, CEO of TechServe Alliance, highlighted that while inflation has declined, it remains above the Federal Reserve’s target. U.S. GDP growth came in at a solid 3.3% in Q2, yet job creation has slowed significantly, with August adding only 22,000 jobs. Roberts noted, “Since July, the number of unemployed has actually exceeded the number of job openings—a clear inflection point in the employment landscape.”
Layoffs have been on the rise, though determining the role AI has played in the decision can be difficult. Roberts explained, “There’s probably a mix of underlying causes, but we are certainly seeing an uptick in layoffs.” IT employment, after peaking post-COVID, has experienced a modest decline, while federal government shutdowns and political uncertainty add further volatility to the overall labor market.
Talent Pipeline & Immigration Issues
The technical talent pipeline faces continued strain, particularly around immigration policies. The recent Presidential Proclamation propose a $100,000 fee on certain H-1B filings, along with other restrictions that could impact access to foreign talent. Roberts remarked, if the $100k fee is applied broadly and is ultimately upheld by the courts—an outcome that is far from assured, it has the potential to severely restrict the pipeline of foreign talent.”
While new petitions under the H-1B cap are unlikely to impact staffing firms in the near term due to FY26 cap have already been exhausted, the long-term implications could be significant. “Some of these restrictions, even if ultimately overturned, are likely to discourage individuals in IT and other STEM fields from pursuing opportunities in the U.S.,” Roberts added. Additional measures, such as Project Firewall and fixed-duration status for student visas, are expected to further constrain the talent pool.
IT Staffing Market Trends
The IT staffing market has seen uneven performance across firms. An interactive poll during the presentation revealed that most respondents describe the current market as “spotty, cautious, slow, and bumpy.” Kforce’s Q2 results reflected this mixed performance, with revenue down 5% year-over-year but operating margins improving slightly due to cost control measures. Data from the TechServe360 technology staffing dashboard confirmed this volatility, showing flat month-over-month consultant billing and swings in new job orders.
Firms continue to confront the challenge of high levels of client concentration, with the top five clients accounting for 70% of revenue and the top client alone representing 31%. These high levels of client concentration, combined with an anemic demand environment, presents ongoing challenges for many IT staffing firms.
Engineering Staffing Market Trends
Engineering staffing trends are closely tied to the performance of key verticals such as oil and gas, infrastructure, and manufacturing. Jim Janesky, Principal with Forest Hills Advisory LLC, explained, “Oil prices are at levels that do not encourage investment in drilling and production due to lower global demand.” Infrastructure projects, though receiving federal attention, are slow to materialize due to multi-year implementation timelines.
High-tech and defense segments remain bright spots within engineering staffing, benefiting from targeted investments and strategic spending initiatives. Chemicals and other sectors remain relatively stable, largely reflecting GDP trends. Government-related engineering staffing shows signs of stabilization despite previous volatility from policy shifts and shutdowns.
AI & Technology Impact
AI continues to present both opportunities and challenges for IT and engineering staffing. Roberts explained, “AI will fundamentally transform the workforce—it will eliminate certain roles but also create new ones. What we don’t know is the timeline or the net impact.”
Staffing firms are increasingly leveraging AI to enhance efficiency in recruiting and retention, yet AI adoption also poses the risk of displacing traditional roles. Firms that fail to integrate AI into their processes risk falling behind in a competitive landscape.
Forecast & Outlook
In light of the uncertainty, TechServe Alliance projects modest performance for the coming year. Janesky noted, “We expect IT staffing to be down 1% to up 1% and engineering to be flat to up 2% in 2025.” While large firms such as Kforce have felt the same market pressures experienced by small and midsize firms, they are leaning in to one of their major advantages: lower proportional costs, “Operational efficiency is key—larger firms have the advantage of scale which lowers their costs proportionally, that is one of the primary reasons we created TechServe360—to mimic scale and reduce back-office costs to help small and midsize firms improve profitability in a challenging market.” Both executives agreed that while a deep recession is unlikely in the near term, ongoing inflation, consumer confidence and spending trends, policy shifts, and geopolitical uncertainties will continue to influence the staffing landscape.
In a market characterized by caution and uneven growth, IT and engineering staffing firms must focus on being strategic and looking for opportunities to increase efficiency, lower operating costs, leverage technology and differentiate themselves in crowded marketplace in order to navigate a myriad of challenges that lie ahead.
TechServe members can watch the full October 2025 State of the Industry webinar here.
