Generative AI was supposed to make recruiting firms obsolete. Instead, it has triggered a powerful rebound in US staffing stocks, with ManpowerGroup and Robert Half rallying roughly 94% and 120% from their February and March lows, respectively. ZipRecruiter has surged nearly 183% from its trough, and Recruit Holdings-which owns Indeed and Glassdoor-has climbed about 170%.
The rally is driven by two forces. First, AI tools have dramatically lowered the cost of applying for jobs, flooding employers with AI-generated resumes. That paradoxically raises the value of professional screening and vetting. Second, both industry leaders posted better-than-expected second-quarter results, confirming what analysts describe as a cyclical recovery in the staffing industry.
AI resume flood makes screening more valuable
The market's original fear was straightforward: generative AI could automate resume screening, job description writing, and even interviewing, eroding the reason staffing firms exist. The reality has unfolded in the opposite direction. Employers now face not "not enough resumes" but "too many resumes," and identifying genuinely suitable candidates from a sea of AI-generated applications has become a new pain point.
William Blair analyst Trevor Romeo said the rising volume of AI-generated applications may make companies more reliant on professional recruiters for resume screening and candidate vetting. In other words, AI has lowered the cost of "applying" while raising the value of "screening."
For HR professionals, the practical implication is that AI literacy is becoming part of the job. Understanding how these tools shape the applicant pool-and how to use them for screening-is increasingly central to the role. Resources like AI for Human Resources and the AI Learning Path for HR Managers address exactly this shift.
Earnings validate the recovery
The most critical catalyst behind the staffing stock rally is tangible earnings performance. ManpowerGroup posted its highest quarterly operating profit in three years in the second quarter. Robert Half beat market expectations and signaled a positive demand outlook.
BMO Capital Markets analyst Jeff Silber said the market "threw the baby out with the bathwater" earlier this year amid "SaaS doom" panic. He wrote that staffing stocks tend to outperform in the early stages of an HR industry recovery, and the sector is currently in that recovery phase, with most industry indicators having returned to growth.
UBS analyst Joshua Chan acknowledged that real data is shifting his previously pessimistic view on AI disruption in the staffing industry. Barclays analyst Manav Patnaik said the latest results from both companies demonstrate that the staffing industry recovery is "unquestionably underway."
AI as an efficiency tool, M&A adds heat
Staffing firms are also actively using AI to improve their own operations. ManpowerGroup has applied AI to interview assistance processes. Bloomberg Intelligence analyst Stuart Gordon noted that HR companies can use AI to boost productivity, reducing operating costs and improving talent-matching efficiency.
UBS's Joshua Chan believes that as long as the staffing industry can sustain growth-even if that growth is primarily cyclical-market concerns about AI disruption may gradually fade. The discussion has shifted from "will AI replace staffing firms" to "can staffing firms use AI to become more efficient recruiters."
Private equity firm Silver Lake is reportedly in talks to acquire HR software maker Workday, sending Workday shares higher. The news signals that investor interest in the sector is warming again, a stark contrast to the exodus just months ago.
Valuation pressures and labor market risks
The surge does not mean risks have disappeared. According to data compiled by Bloomberg, ManpowerGroup's share price is now just 1.5% below the average analyst price target. Robert Half has already exceeded its average target by more than 20%. After this rapid repricing, valuation pressures have re-emerged for select names.
A bigger wildcard is the US labor market. US employers unexpectedly shed jobs in July, and employment figures for the prior two months were revised downward. Despite the recent recovery in professional services stocks, share prices remain well below their early-2022 peaks, a period that preceded the softening of the US labor market amid high inflation and rising interest rates.
Why this matters for HR professionals
The staffing stock rally is a correction of the market narrative: AI has not eliminated demand for recruiting services. If anything, the proliferation of AI-generated content has made screening, judgment, and matching more important than ever. But whether this rebound becomes a sustained long-term trend depends on two variables: whether the US labor market can genuinely recover, and whether staffing firms can prove they are beneficiaries of the AI wave rather than casualties of it.
For HR teams, the immediate takeaway is operational. The flood of AI-generated applications means manual resume review is no longer scalable. Teams that adopt AI-assisted screening tools-and train their staff to use them-will handle the volume more effectively than those that rely on traditional processes. The companies that treat AI as a screening aid rather than a threat are the ones positioned to benefit.
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