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Economy in Brief

Temp Hiring Bolsters Jobs & Portends Labor Market Improvement
by Tom Moeller December 07, 2009

The November employment report indicated that the number of temporary help jobs grew by 52,400, the fourth consecutive month of increase. Since July temp employment grew by 116,900 (6.7%), a gain which outstripped the 95,500 (0.7%) four-month increase in health care employment, the 48,800 (1.9%) rise in social assistance payrolls, the 40,000 (0.8%) gain in state gov't jobs as well as the few others.

Not only has the growth in temp jobs been impressive, but as a leading indicator of full-time employment it bodes well for the job market. During the last two economic cycles temporary employment began growing a year or two before the recoveries in total employment, which both lagged the official end of the recessions.

The ratio of temp employment-to-total payroll jobs also has value as a cyclical indicator. During the last ten years there has been an 85% correlation between the ratio and real GDP growth. Five years ago, a higher ratio near 2.0% was consistent with 3.0% growth in real GDP. Temporary help jobs increased due to workers' hours-worked flexibility and, for the most part, lower benefit costs. Then, as economic growth eased, the ratio fell to its current 1.4%, the lowest level since 1994.

Overall, economic recovery will bolster not only full-time employment, as usual, but temp jobs as well. If the Consensus 3.0% growth forecast through the end of next year is on the mark, temp employment should rise along with its share of the total; indicating a greater number of workers re-entering the workforce. That would turn-around the decline in the labor force participation rate which recently has plumbed a 25-year low of 65.0%. However, the "quality" of those new jobs likely will differ greatly from the benefits of full-time employment.

Why do firms use temporary workers? from the Federal Reserve Bank of Chicago can be found here.

Today's speech titled by Frequently Asked Questions Fed Chairman Ben S. Bernanke is available here

Nonfarm Payrolls November October September Nov. '08 2008 2007 2006
Temporary Help (000s) 1,862.1 1,809.7 1,765.6 2,128 2,346.4 2,599.4 2,641.6
  Share of Total Jobs (%) 1.42 1.38 1.35 1.57 1.71 1.89 1.94
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