IQNtrospective 2Q12.1 – Temporary Labor: Engine of Job Creation
The Bureau of Labor Statistics monthly Employment Situation report is closely watched for insight on the direction of the overall economy. The strong political and market reactions to the lower than expected employment numbers in 2Q 2012 underscores the importance of this broad set of indicators. Narrow focus on the top-level employment news, however, sometimes obscures more detailed trends. While the recent employment numbers are frequently described as weak and unsatisfactory, the US economy has enjoyed net positive job creation every month since October 2010. Also lost in the detail is the outsized contribution that temporary jobs have made in this economic recovery.
Temporary Hiring Creates New Jobs
What the data tells us…
Jobs through temporary employment agencies typically account for about 2% of total non-farm employment – more in good times and less when the economy is struggling. These jobs are more volatile than direct hire positions, being eliminated and created more quickly in response to changing business conditions. For this reason temporary hiring is regarded as a leading indicator of larger employment trends. Looking at recent history, indications are positive despite some bumps in the road.
Why is this important?
Since January 2011, temporary labor hiring has accounted for more than 10% of all new job creation (and 15% in the first two quarters of 2012) – a very credible contribution by a job sector that currently represents less than 1.9% of total non-farm employment. Assignments through employment agencies have recovered 86% of the jobs lost during the recession, higher than almost any other industry. As inspection of the chart on reveals, increases in temporary agency positions correlate strongly to the job creation performance of the broader US economy. When temporary jobs increase, new hiring overall is robust. Months of low agency labor increases tend to align with poor overall job creation. This connection has been particularly pronounced over the past 12 months.
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