Why healthcare workers continue pushing US job gains higher

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The US economy keeps adding new jobs. A big reason: your local hospital.

Healthcare contributed 70,000 jobs in January, accounting for almost 20% of additions to the American workforce. The new hires included people who work in hospitals, outpatient centers, and nursing and residential care facilities.

Investors can expect that strong hiring to continue this year, experts say, because of a structural shift underway as the pandemic recedes: Hospitals are relying less on the temporary help they needed when COVID-19 was at its peak and more on full-time staff as normal routines return.

This workforce restructuring is a blessing for healthcare providers that had to shell out big money for traveling nurses during the pandemic but a potential reckoning for publicly traded staffing companies that provided many of those contract workers.

"The healthcare industry is healing and better able to meet peak demand when needed," Courtney Shupert, an economist at MacroPolicy Perspectives, told Yahoo Finance. "And so it means that firms ... can hire more permanent, full-time employees and maybe rely less on some of those expensive contract nurses and just contract labor in general."

Returning to normal

To understand why healthcare hiring is changing, it helps to understand how COVID-19 upended staffing across the industry. As turnover accelerated and demand spiked in different parts of the US, hospitals turned to contract nurses for help.

Overall, total healthcare staffing more than tripled during that time, with the travel nurse subsegment growing even faster, Trevor Romeo, a research analyst at William Blair & Company, told Yahoo Finance.

Those nurses weren't cheap. For instance, AMN Healthcare Services (AMN) in 2019 billed hospitals $75.49 per hour for temp staffers who were largely nurses, according to data from Romeo. That then surged to $145.34 per hour in March 2022, or almost double the pre-pandemic rate.

The use of these contract workers has begun to unwind as hospitals take on a larger permanent workforce. Some of the job gains in the healthcare sector have been offset by losses in the temporary staffing sector, according to Shupert.

(Credit: MacroPolicy Perspectives)
(Credit: MacroPolicy Perspectives)

"While temp services are a smaller share of total employment than healthcare, you can see these two industries moved more inversely since 2020, especially in 2023, when temp services continued to decline while healthcare employment continued to grow," she said.

Still the need for more healthcare staff remains. Patient volumes are robust as folks are now getting procedures they put off during the pandemic. Add to that aging baby boomers needing more healthcare services, a long-term trend that will continue to grow.