Posted on: Sunday, August 3, 2003

More demand seen for temp work

By Andrea Coombes
CBS MarketWatch

The U.S. job market is beginning to show signs of life through increased hiring at temporary employment agencies — often a precursor to a job-market turnaround.

While the U.S. jobless rate hit a nine-year high in June, temporary employment rose 2 percent, adding 44,000 jobs in May, the biggest one-month rise in seven years. In June, temporary employment rolls gained another 1.7 percent, with 37,700 new jobs, according to the U.S. Labor Department.

About 2.2 million Americans worked as temp workers in June, according to the preliminary, seasonally adjusted data.

Economists often consider temp hiring a leading indicator of overall job-market improvement.

"The hiring of temps can be a sign that, even though there's still some shedding of jobs, firms rather than hiring people back on a permanent basis are looking to meet increased demand with temps," said Matthew Martin, an economist with Economy.com.

Hiring patterns are following a typical recovery scenario, some temp agencies said, with companies adding clerical and blue-collar jobs to fill out ranks thinned by cuts during the recession, but temp hiring of professionals such as accountants is gaining more slowly.

Some false starts last year in which temp job gains were not sustained are leading some to express a cautious outlook.

"We've definitely seen an uptick," said Linda Paulk, president of Snelling Personnel Services. However, "we are anticipating, based on what employers have told us, that it will be a more gradual approach to full-time hiring" than occurred after the recession of the early 1990s.

The unemployment rate peaked at 7.8 percent 15 months after the recession ending in March 1991. It's been 19 months since the end of the most recent recession in November 2001, as dated by the National Bureau of Economic Research.

In July, unemployment declined to 6.2 percent from 6.4 percent in the previous month. Although that beat many analysts' estimates, much of the drop came from people giving up on job searching.

Current job-market signals are mixed. Even as tech-industry giant Microsoft announced recently it plans to hire 4,000 to 5,000 workers, job layoffs continue at other companies, and state budget crises may pull down employment numbers.

For instance, California's budget, expected to be signed into law this weekend eliminates 16,000 jobs.

In previous recessions, blue-collar and clerical hiring exceeded professional jobs initially, experts said.

"You often see the light industrial and clerical sectors of the temp industry come back first," said Reesa Staten, vice president of research at Robert Half International, a global staffing agency that focuses on professional positions. "Then you might see, following that, the professional sector," she said.

Unskilled light-construction workers are finding temp work because of some retailers' desire to revamp their stores, said Paulk, of Snelling Personnel Services, which fills jobs in light labor, clerical and light technical work.

One retailer has upped remodeling plans by about 50 percent, she said. These firms "are talking about changing, about positioning their companies to take advantage of the economic recovery," she said.

Other employers are hiring temp workers to ease the burden on their permanent workers. Employers are "running so lean that a lot of the existing employees are burned out," Paulk said.

"To help retain those employees when the economy does come back, we're providing a lot of supplemental staffing just to pick up the slack on the work that's coming in," she said.

Some industries have been busy enough to continue hiring all types of temps throughout the slowdown.

"Health care, biotechnology, real estate are still strong," said Staten, and "may have accounting openings, marketing openings, technology openings."

She noted that technology firms' hiring outlook was up in the second quarter, while accounting companies' outlook remained flat.