US Professional and Technical Services Sector
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 976,264 professional and technical services establishments in the US provide specialized expertise to clients and typically operate as third-party contractors. As opposed to producing a physical product, professional service providers are primarily knowledge-based businesses that offer advice and make available the skills of their employees.
Dependence on Government Projects
The US government is one of the largest consumers of professional services, and federal, state, and local government organizations are important customers for several industries in the sector.
Dependence on Expensive, Skilled Labor
The professional and technical services industry is dependent on highly skilled labor and jobs that command high wages.
Industry size & Structure
The professional and technical services sector is comprised of 976,264 establishments that employ 10.8 million workers and generate $2.8 trillion in annual revenue, according to government sources.
- The professional services sector represents 6.5% of the nation's Gross Domestic Product (GDP) and employs 7% of the country's workers.
- The sector is fragmented with the 20 largest firms representing 11% of revenue.
- In addition to employer establishments, the professional services sector has 3.7 million owner-operated establishments with no employees. Subsectors with the highest numbers of nonemployer establishments are management, scientific, and technical consulting services (25%); accounting, tax preparation, bookkeeping, and payroll services (10%); and computer systems design and related services (9%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
- The professional and technical services sector shed about 237,000 establishments in 2021, which equals about 14.7% of existing establishments, according to the Bureau of Labor Statistics. However, the sector added about 353,000 new establishments, which is equivalent to 22% of existing establishments. As a result, the sector had a growth rate of 7.2%.
- The professional and technical services sector is forecast to grow its employment base by 10.9% overall in 2021-2031, which is much higher than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Professional and Technical Services Sector Industry Growth
Recent Developments
Jun 21, 2024 - Signs of an AI Slowdown
- There’s growing skepticism among some tech industry watchers that AI will deliver on its promises of improved sales and profits through revolutionary gains in workplace efficiency, according to The Wall Street Journal. Some AI industry observers suggest that generative AIs - like OpenAI’s ChatGPT and Google’s Gemini - made substantial gains initially, but innovations are slowing. Gen AI tools were trained by combing nearly the entire internet, and that source is mostly tapped out, making huge leaps in improvement harder to obtain. About 75% of white-collar workers said they use AI at work, according to a recent survey by Microsoft and LinkedIn. Another survey by expense-tracking firm Ramp showed that one-third of firms pay for at least one AI tool. Industry experts note that the gap between workers experimenting with AI versus those whose firms are paying for it suggests adoption has been slow.
- The Associated Builders and Contractors (ABC) Construction Backlog Indicator fell 0.1 months to 8.3 months in May compared to April. Backlogs were down 0.6 months compared to May 2023’s 8.9 months. The infrastructure segment saw the biggest drop in May as backlogs slipped to 8 months compared to 9.8 months in April. The heavy industrial backlog rose by 1.3 months, and the commercial and institutional backlog was flat. The ABC’s Construction Confidence Index for sales rose to 59.9 in May from 59.7 in April. A Confidence Index sales reading of 50 or more indicates most contractors are optimistic about sales. ABC Chief Economist Anirban Basu said, “Over a year has passed since the Federal Reserve raised the target range of the federal funds rate above 5%. Despite widespread expectations that rates will remain elevated through at least the end of the year, contractors remain confident about the future.”
- Several major consulting firms - including McKinsey, Accenture, and BCG – have adopted merit-based hiring rather than relying on recruiting candidates with degrees from elite universities, according to The New York Times. Skills-based hiring strategies aim to pull potential recruits from a wider pool of candidates beyond the Ivy League. Some companies, including Accenture, no longer require a college degree. However, as well-meaning as meritocracy-focused hiring may be, implementing it can be challenging. A Harvard study examined hiring by large firms between 2014 and 2023. The study revealed that while there was a significant rise in postings that didn’t require degrees, only about 3% of the jobs were filled by people without a degree.
- Computer science university students are finding tech companies’ demand for entry-level applicants has cooled compared to just a few years ago, according to The Wall Street Journal. After a hiring spree during the pandemic, some large tech firms have cut back on hiring, and some have trimmed jobs. Tech budgets are also shifting to investments in AI, which some tech job seekers worry could reduce demand for human coders. Compared to pre-pandemic levels, software development job postings on Indeed are down 30%. As entry-level computer science roles drop, the number of potential competing applicants is rising. As of 2023, the number of US university students majoring in computer science has increased by 40% in just five years.
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