Contractors, Freelance and Dev/Design Shop – Health of the Market?

I went freelancer in NYC a few years back, and at first, it was great. Always had the intention of growing a small design/dev shop with a target of about 12 to 15 in five years. But, I either really suck at finding new business or something is up.

Most experienced independent UX and product designers I know are not doing so well. Product management consultants are heading in-house. Smaller shops are converting full-time staff to contractors. A few long-standing digital shops have shut down, others sold. I'm hearing the same story from development firms too.

Two questions: 1. Is anyone not seeing this?

2. If so, how are you navigating this and still growing?

The only thing I hear from people who claim to be doing OK is that they are recommended by former clients. My clients love working with me and do come back when they have more work, but this is not a big enough pipeline and seems too passive to sustain growth.

If you are experiencing the same things, sound off too. If nothing else, others will see they are not alone.