Key takeaways:
- Market stabilization is holding, but tariffs and trade policy have introduced a layer of economic uncertainty that’s reshaping how employers approach headcount and accelerating demand for contingent arrangements.
- AI adoption has reached production scale across the industry, bringing two new pressures with it: AI-generated resumes are eroding candidate quality signals, and most firms still lack the governance infrastructure regulators and buyers are starting to expect.
- Workers aren’t chasing flexibility in early 2026; they’re staying put, and that shift in behavior is tightening candidate supply in ways the traditional sourcing methods weren’t built to handle.
In December, we published a breakdown of key trends impacting the staffing industry in 2026, based on what the data told us through the end of 2025. Four months into the year, some of those trends are tracking as expected. Others have taken on dimensions that weren’t visible at year-end. And one has turned in a direction that changes how firms should be thinking about candidate strategy right now.
Market stabilization is holding, but tariffs added an unexpected variable
The stabilization story from December is mostly intact. The ASA Staffing Index showed staffing employment running 5.3% above the same period in 2025 in mid-March, with year-over-year gains in 25 of the past 26 consecutive weeks. In fourth-quarter 2025 employment and sales data, ASA CEO Stephen Dwyer confirmed that “the low-hire, low-fire labor market tempered demand in 2025,” but called the Q4 rebound a signal that employers are making increasingly cautious investments in flexible and contract talent.
What’s developed since December is a significant new variable: tariffs and trade policy. ASA’s industry outlook now lists trade and tariff pressures alongside softer demand, labor challenges, and economic uncertainty as primary concerns for member firms. Goldman Sachs economists have identified tariff uncertainty as a direct contributor to the job growth slowdown in H2 2025, noting it made employers less confident about hiring. At its March 2026 meeting, the Federal Reserve held rates steady and raised its 2026 inflation forecast to 2.7%, with elevated uncertainty (partly driven by energy prices and trade policy) cited as a factor in the decision.
The impact on staffing is a “wait and see” posture from employers, pushing clients away from permanent hires and toward contingent arrangements. For agencies positioned in contract and temp staffing, that’s a tailwind. For those relying on direct placement fees, it’s a headwind. Either way, demand forecasting in early 2026 is unusually difficult, and firms that built their 2026 plans around a clean, steady recovery should pressure-test that assumption now.
AI adoption has reached production scale, and new pressures have arrived with it
Previously, we described 2025 as the year AI moved from experimentation to infrastructure. That transition is more evident than ever. Both our upcoming State of Staffing Benchmarking Report and Bullhorn’s latest GRID trends report show that AI and automation are top priorities for agencies this year, and AI adoption contributes to revenue growth.
But that adoption brought two complications:
- The first is the quality-signal problem. AI-generated resumes have made it harder to distinguish genuine qualifications from polished presentations. ASA members have noted this explicitly: there are more candidates in the pool than before, but they often look and sound the same because AI wrote or optimized their applications. For firms whose value proposition centers on matching quality, that’s a real operational challenge.
- The second is oversight. Rob Mann, who ran roundtables at the Healthcare Staffing Summit, found almost no hands went up when he asked who had both an AI policy and AI training in place. “That gap is huge,” Mann told us. Most employees are already using AI in some form, whether through a public tool, a paid platform, or something the firm provided, and most firms have no documented framework governing that use.
The leading firms have moved well past the tool-selection stage. Brandon Metcalf, CEO of Asymbl, described running roughly 100 “digital workers” across 10 business functions in a recent episode of our podcast. His framing points to where the real competitive gap is opening. “We genuinely look at it as we’re not displacing our human workers,” Metcalf said. “Everyone ends up becoming sort of a manager, and they’re managing these digital workers to a system.” That’s an organizational design conversation. Most firms aren’t having it yet.
AI regulation has tightened and fractured at the same time
Our last piece described AI hiring regulation as an accelerating compliance obligation. That’s still true. What’s developed since then is a simultaneous federal pushback that’s added a layer of legal complexity the industry didn’t anticipate.
California’s FEHA regulations took effect in 2025 as expected. Colorado’s AI Act is on track for June 30, 2026. And NYC Local Law 144 enforcement intensified after a December 2025 audit found it had been “ineffective,” creating political pressure for stricter crackdowns on firms that haven’t completed required bias audits.
At the same time, a December 2025 executive order directed federal agencies to block or limit state AI laws and created an AI Litigation Task Force to challenge them in court. The U.S. Senate voted 99-1 to preserve state authority over AI hiring regulation, so federal preemption isn’t resolving this quickly. State laws remain in force, their long-term enforceability is being actively contested, and the federal position is still taking shape.
For staffing firms, the compliance case and the commercial case are converging. Dan Mori of Staffing Mastery, addressed the commercial dimension directly when he joined The Staffing Show in January 2026. Buyers are now asking whether their staffing partners are documenting and governing their AI use, and that’s becoming a vendor selection factor. “We went from the pandemic shutting things down, to remote work, to digitization, and then AI came in and permeated everything,” Mori said. “It’s had a major impact on the way buyers view talent, the way they want to source it.”
Compliance infrastructure isn’t just a legal asset. It’s a sales asset.
M&A is active, and the specialization premium is widening
Our December article described a selective but active M&A environment, with valuations favoring specialized, tech-enabled firms. That picture is developing as expected, and the gap between those firms and the rest is getting more pronounced.
PwC’s 2026 industrials and services outlook confirmed private equity-led consolidation is continuing in staffing, with recurring, tech-enabled services as the primary target. Atlantic International Corp.’s January 2026 acquisition of Circle8 Group, creating a $1.2 billion global workforce solutions platform uniting North American light industrial staffing with European IT talent, illustrated how the cross-border, specialization-plus-tech thesis is playing out in actual deals.
Strategic buyers are still pursuing firms with sector depth, defensible niches, and modern tech stacks. Generic, low-margin firms without a clear differentiation story are finding less buyer interest in early 2026, not more. The firm you’d want to acquire is the same firm you’d want to run right now.
Workers have shifted from demanding flexibility to holding their positions, and candidate supply is tightening
This is the trend that’s taken the sharpest turn since December.
In December, we described workforce preferences centered on flexibility as non-negotiable: workers demanding hybrid options, same-day pay, and frictionless application experiences. That framing reflected what 2024 data was showing. What’s actually happening in early 2026 looks different.
Workers aren’t negotiating hard for new opportunities. They’re staying put. Monster’s 2026 WorkWatch Report found that only 43% of workers plan to job search this year, down sharply from 93% last year, with 40% saying they see the job market as worsening. ASA members have started calling this “job hugging”: employees, even unhappy ones, holding their current roles because they fear being the last one in if cuts come.
Lower worker mobility means a smaller active candidate pool, longer outreach cycles, and more friction in sourcing. Firms that built their model around workers actively looking are feeling that pressure. The flexibility message still matters for candidates who are in motion. But the harder sourcing problem in early 2026 is reaching workers who’ve decided they’re not.
Flexibility is still a threshold requirement, not an expectation you can skip. But it’s no longer the differentiator it was shaping up to be 12 months ago. The competitive edge now belongs to firms that can identify and engage passive talent effectively, not just convert active applicants faster.
What to watch for the rest of 2026
Employers are holding hiring decisions pending economic clarity. Workers are holding their positions for the same reason. That standoff is the operating environment for at least the next two quarters.
The firms ready to move through it are the ones building around uncertainty rather than waiting for it to resolve. They’re deepening specialization, tightening governance, investing in data-driven commercial decisions, and developing sourcing capacity built for a passive-talent market.
