Nov. 6 (Bloomberg) -- Companies including Best Buy Co. are stepping up hiring of temporary workers, a trend that some economists say may signal an end to U.S. job losses in coming months.

Temporary-worker payrolls rose by 34,000 in October, the third consecutive monthly increase and the biggest gain in two years, the Labor Department said today in its monthly unemployment report. Total payrolls fell by 190,000 workers, and the unemployment rate jumped to a 26-year high of 10.2 percent.

A rise in temp hires is considered a bellwether of increases in overall employment. Payrolls at temporary-help agencies often turn up before total employment because companies aren’t certain increases in demand will be sustainable enough to warrant the expense of taking on permanent staff.

“This is a way for companies to dip their toes in the water,” said Neal Soss, chief economist at Credit Suisse in New York. “If firms are willing to do that, it tells you that they’re feeling a little better about their business prospects, and that’s the beginning of something.”

Payrolls at temp agencies reached a trough in April 2003 in the aftermath of the 2001 recession, according to figures from the Labor Department. Total payrolls reached their lowest point four months later.

Richfield, Minnesota-based Best Buy, the world’s largest electronics retailer, has said it plans to hire more seasonal holiday workers this year to help meet demand for Internet- connected flat-panel televisions and mobile phones.

Retail Cuts

Nonetheless, retailers shed 39,800 workers in October after a decline of 44,200 the previous month, today’s Labor Department report showed. Johnson & Johnson, the world’s largest health- products company, is among businesses that continue to cut jobs.

Government figures on temporary hires are seasonally adjusted, meaning the recent boost is not tied to the upcoming holiday shopping season, when many stores expect to reap half of their annual revenue.

Overall employment typically increases three to six months after gains in temporary staffing, said Steve Berchem, vice president of the American Staffing Association, drawing on more than 30 years of research.

“That’s about how long it takes for businesses to have enough confidence in real economic growth to commit to expanding their payrolls,” he said.

Some job-seekers say they have seen better prospects recently for temporary employment. Alexandra Moller, 35, said she has been offered two short-term assignments in November after “two months of not getting a call.”

The unemployed Washington resident, who has been looking for a full-time job since September 2008, said she also has an appointment with another temp agency next week.

“My sense is that there are more temp jobs now than there were a few months ago,” Moller said. She added that “it took weeks to get an interview at other places” where she had applied in September.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: November 6, 2009 14:07 EST