Temp workers are both canaries, spring robins

June 15, 2013

Temporary workers are gaining even more clout as economic harbingers.

Long considered spring robins of better times ahead, they’re increasingly also viewed as coal mine canaries who can signal a cooling economy.

That’s because companies since the Great Recession have stocked up on temp workers with no intention of ever offering them permanent status, experts say.

For decades, corporations hired temp workers in early stages of economic expansions and planned to make them permanent as the economy warmed, a strategy dubbed “try before buying.”

Now, more companies are keeping a buffer of temp workers to minimize outplacement costs and damaging morale of permanent workers when the economy inevitably enters a cyclical slowdown and layoffs become necessary.

“People learned something during the recession,” said Jon Osborne, vice president of research and editorial at Staffing Industry Analysts, a Mountain View, Calif., firm that follows the temporary employment industry. “If you were using a large amount of contingent labor, you were in pretty good shape.”

The trend is a small godsend for analysts.

Rising consistency in temporary employment is expected to sharpen accuracy in forecasting slowdowns or recessions. While temporary workers still transition into permanent employment like they did before the recession, fewer are able to make the leap.

Examples of formal temporary employment date at least to the 15th century, when entrepreneurs helped English serfs find part-time jobs to avoid wage controls imposed during a labor shortage resulting from the plague.

Temporary jobs flourished after World War II with the rise of office clerical staff, and in Indiana, myriad warehouses and factories took advantage of the ability to weather booms and busts by hiring people for only as long as they were needed.

Since the recession, state and local temp employment has climbed faster than the category has nationally due to the concentration of cyclical manufacturing and logistics sectors.

Temp numbers have trended at record levels for about a year, with the Indianapolis area posting 40,900 of the jobs in April, the most recent month for which figures are available, and the state, 87,700.

Nationally, 3.26 million were classified as temporary in April, still short of the 3.5 million during the peak in 2006 and 2007.

Temporary workers amount to only a sliver of total employment—roughly 2 percent of the nonfarm civilian jobs, although the figure ranges upward of 30 percent in some industries.

Yet their small numbers are tracked closely by analysts, economists and others hoping to predict the economy.

Osborne said corporate decisions to rely more on temps means temporary employment is gaining in significance.

“It’s a tool that’s being used by a greater degree than it was in the past,” Osborne said.

John Elwood, president of Columbus-based Elwood Staffing Service Inc., said client companies are becoming quite deliberate about keeping part of their head count temporary.

“Companies are more strategic,” he said. “Businesses need to be and want to be pretty lean.”

Gary Hentschel, president of the Indiana district of KeyBank and a former president of Greenwood-based staffing firm Personnel Management Inc., is less certain that temporary employment is becoming more revealing as an economic indicator.

The recovery and expansion have been so unusually slow that it casts doubt on whether temps are as accurate an indicator as they used to be, he said.

“You’re seeing big staffing increases, but that isn’t necessarily an indication of the economy getting better,” Hentschel said.

Also, he said, Midwestern companies tend to be more traditional in hiring practices, thus less likely to keep workers in temporary status.

Osborne, Hentschel and Elwood say they see no hint of recession in the temporary hiring figures they track.

Staffing Industry Analysts’ ongoing surveys of companies with at least 1,000 employees suggests that total temporary employment in the country will continue to climb and return to the most recent peak, in 2006, at the end of 2014, Osborne said.

Historically, temp employment slows after reaching record levels, and Osborne expects hiring to slow in 2015.

Elwood expects steady, modest growth in temporary hiring through at least the end of the year.

Hentschel said the environment is ideal for temp staffing firms. While the economy is growing, there is still enough uncertainty that companies are reluctant to hire permanent workers.•
 

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