There was a silver lining in June’s overall weak unemployment report. Temp hiring was up. Companies added 25,200 non-permanent workers to their payrolls. That was up from 18,600 the month before.
This may be a good sign. Traditionally, temporary hires have been a leading indicator for overall job growth. Companies use temp hiring as a way to dip their toes in the water. And temp jobs often eventually turn into permanent ones. So the strength in temp hiring could be a sign that the recent drop in overall employment growth, might be more, well, temporary than a year ago.
Like last year, hiring has fallen going into the summer. But unlike last year, temp hiring has not followed a similar path. Last June, companies cut the number of temp workers by nearly 8,000. This year, on the other hand, temp hiring has held up, adding 137,000 jobs in the first six months of the year, compared to just 59,000 in the first half of 2011.
The question is whether the traditional relationship between temp jobs and overall employment has broken down. Some worry corporate hiring patterns are changing, pushing a shift toward more permanent, temp positions. The severe recession coupled with uncertainty over Europe and policy changes like taxes and health care may be causing companies to stick with temp workers longer than usual. And perhaps, the longer companies do that, they could realize temp workers are all they need.
Indeed, temporary hiring was very strong at the beginning of the recovery in early 2010, and that doesn’t seem to have translated into strong jobs growth overall. “Anyone you know with kids in their 20s they will tell you that’s how big companies hire these days,” says Steve Blitz, chief economist at ITG Research.
And while temp workers remain a small percentage of the overall workforce, just 2.2%, it’s up from an average of 1.9% since 1990, which is as far back as the Bureau of Labor Statistics tracks them. What’s more, the percentage of jobs gains that are coming from temporary hires is up. In the more than two years since the jobs market turned up in March 2010, there have been 14 months in which temp jobs have accounted for at least 15% of the overall employment gains. In June, it was 30%. That happened just seven times in the last recovery. And that may be another sign that the job market may never be as strong as it once was.
So, while more temp jobs may be a silver lining for now, it could be another sign that our economic skies may remain cloudy for much longer than we ever thought.