The recruitment process outsourcing (RPO) market is being reshaped by a difficult combination: job demand is beginning to recover, the available labor pool is tightening, and employers are competing for candidates who have more options and more technology at their disposal. For RPO providers, the challenge is no longer simply managing requisition volume. It is converting demand into hires with greater precision, speed, and insight.
That was a central message from Tim Gates, Director of RPO and BPO Enterprise Accounts at Indeed, during the 2026 RPOA Annual Conference. Drawing on labor-market data and conversations with enterprise RPO clients, Gates described a market in which modest changes in hiring demand can intensify competition for talent. He also outlined how those conditions are changing what clients expect from RPO partnerships.
Gates noted that September 2026 marked the first time in nearly four years that U.S. job postings had moved above the prior year's level. Indeed data showed postings approximately 1% higher year over year and 4% above the February 2020 pre-pandemic baseline. Yet hiring has not accelerated at the same pace. Monthly hires averaged about 80,000 from January through August, according to the figures Gates cited, before slowing to an average of 51,000 across July, August, and September, with September at 29,000.
At the same time, the labor force had declined by nearly 700,000 during 2026. Gates attributed the contraction primarily to lower immigration and an aging workforce, with more people retiring than entering the labor market. He contrasted more than 2.7 million people entering the United States through immigration in 2024 with an estimated 650,000 to 700,000 in 2026. The effects are particularly relevant in sectors such as healthcare, where he said approximately 17% of nurses are foreign-born.
The longer-term outlook adds to the concern. Gates cited a Bureau of Labor Statistics projection that labor-force participation could fall to 61.1% by 2034. Although the percentage-point change may appear modest, he said it could represent more than four million fewer people in the workforce. For employers, that means the competition for qualified candidates may remain intense even if overall hiring demand grows only gradually.
Other indicators reinforce the picture of a cautious labor market. Gates put unemployment at approximately 4.2%, within a range of 4.0% to 4.3% for nearly two years. Hiring and quit rates were also relatively low, at about 3.2% and 1.9%, respectively. With fewer workers changing jobs, employers cannot rely on normal turnover to replenish candidate supply. Inflation, consumer confidence, and wage growth add further pressure: Gates cited inflation of approximately 3.8%, advertised wages rising about 2.5%, and average wages increasing 3.5% overall and 3.7% for entry-level workers.
The national picture does not tell the whole story. Gates emphasized that hiring conditions vary significantly by geography, industry, and skill set. New England and the Upper Midwest were examples of tighter labor markets, while coastal California had more candidate availability for certain technology roles because demand remained below its earlier peak.
Industry trends also point to uneven recovery. Gates said the share of sectors tracked by Indeed showing year-over-year job growth rose from 51% in June to more than 60% in September. Engineering and healthcare, particularly home health, were among the stronger areas. Technology was recovering from its post-pandemic correction, although it remained below its previous high.
For RPO teams, these differences make broad assumptions risky. A sourcing strategy that works in one region or occupation may not translate to another. Gates encouraged providers to use market and pay intelligence to help clients understand where talent is available, where competition is strongest, and whether their hiring expectations align with local conditions.
Gates described a shift toward modular, project-based RPO engagements. Over the past two years, he had seen more clients seek support for defined hiring projects, such as opening a new location, filling a specialized skill group, or managing a temporary surge. Some RPO providers are also taking on work that might once have gone to staffing firms, as employers look to bring needed talent into longer-term roles.
At the same time, technology and AI have become table stakes rather than differentiators. Clients increasingly expect providers to use technology for sourcing, screening, and scheduling, while retaining human judgment for candidate engagement and hiring decisions. They also expect RPO partners to contribute labor-market intelligence and support broader workforce strategies, not simply process requisitions. In Gates’ view, the model is moving toward orchestration across more of the talent acquisition process, with retention also entering the conversation.
That broader responsibility is changing how performance is assessed. Gates pointed to measures such as time to first contact, hires per opening, offer acceptance, verified candidate rate, and hiring-manager quality scores. For example, a provider filling 0.9 hires per opening could demonstrate performance well above the national ratio he cited of approximately 0.71. These measures help connect activity to outcomes and show clients where a program is creating value.
The need for that precision is becoming more urgent as application volume rises. Gates said applications per job had increased 111% since 2022, while the recruiter population had fallen by a little more than 50%. More applications and fewer recruiters increase the value of efficient technology, but volume alone does not solve the underlying challenge: identifying qualified people and converting their interest into hires.
The labor-market pressures Gates described set the stage for another major change: candidates are using AI to search, apply, prepare, and manage their job searches. Roughly two-thirds of candidates, he said, now use AI in some part of the hiring process, while more than 80% of hiring managers view that use as a concern.
For RPO providers, this changes the nature of candidate evaluation and engagement. Resumes may be tailored to each opening, applications can be submitted from candidate profiles, and interview preparation increasingly includes AI-powered mock conversations. The result is a more informed and active candidate who may be pursuing several opportunities at once.
These developments make speed and verification more important, not less. They also raise a new question for providers and employers: how should recruitment adapt when candidates arrive AI-prepared? The second part explores that question, including how AI is changing the candidate journey and what RPO teams can do to respond.