Healing U.S. Labor Market Means Fewer Temporary Jobs
Temporary employment is contributing less to job creation in the U.S. after buoying the labor market in the first six months of the year, a sign employers are more confident about the durability of the economic expansion.
The monthly change in the number of people on payrolls of temporary-help service businesses averaged 2.2 percent of the monthly gains in total nonfarm payrolls during the July-October period, well below almost 19 percent in the first half of 2012, based on seasonally adjusted data from the Labor Department.
The steep decline came as the total number of jobs created each month rose to an average of 173,000 in July-October compared with 66,667 in the second quarter. The “significant improvement” shows that companies became comfortable adding full-time workers to their payrolls, said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. The result is a “double positive” for the economy: more jobs and more of them full-time.
While hiring in the four months ended in October still was below the first quarter’s 225,667 average, the recent gains suggest that “bogeyman talk” about business-owner cautiousness was exaggerated, Hoffman said. “This flies somewhat in the face of the notion that employment had been put on hold” leading up to the Nov. 6 elections, he said.
For investors, the decline in new temp-service jobs relative to total hiring is among “a number of supporting data points” showing an improvement in the labor market, according to John Canally, an economist and investment strategist at LPL Financial Corp. in Boston, which oversees about $350 billion in investments. It’s a “positive sign” that businesses feel better about adding people to their payrolls and also gives more assurance to newly hired full-time employees.
“From a psychological standpoint, if you have a full-time job, your spending decisions are going to be more optimistic than if you have a temporary job,” Canally said. That’s largely because of the stability these positions typically provide, as well as noncompensation benefits, including health insurance and retirement contributions, that temps may not be offered, he said.
Canally also points to consumer confidence and the number of people who voluntarily quit as evidence of a mending employment market. Sentiment, as measured by the Bloomberg Consumer Comfort Index, was minus 34.4 for the week ended Nov. 4, near a four-year high of minus 31.4 reached in April of this year. Meanwhile, an average of 2.1 million people left their jobs each month from January through September on a seasonally adjusted basis, compared with 1.95 million a year earlier, Labor figures show.
The recent gains suggest job creation “may be starting to get rolling again” after it “went into retrograde” in the second quarter, said John Challenger, chief executive officer of Challenger, Gray & Christmas Inc., a human-resources consulting company based in Chicago.
If employers gain more confidence in the economic outlook, they could worry about a shift from a “buyer’s market to a seller’s market from the perspective of prospective workers,” he said. That might make the environment for hiring and retaining qualified employees more difficult, so companies are more likely to add people on a full-time basis, he added.
Now that the presidential election is over, the so-called fiscal cliff still weighs on hiring decisions, according to Challenger. The U.S. faces higher taxes and reductions in spending on government programs that will take effect in 2013 unless Congress acts. And millions of people remain out of work, even amid the encouraging signs that employment is “firming up,” he said.
The U.S. has lost almost 4.3 million positions since nonfarm payroll employment peaked in January 2008, based on Department of Labor figures. Meanwhile, the jobless rate -- at 7.9 percent in October -- is more than three percentage points above the 4.6 percent average in the year before the 18-month recession began in December 2007.
The labor market has more healing to do, so “if you have a job, you’re going to keep it; if you don’t have one, it’s still hard to get one,” Canally said.
Even so, the likelihood of a new job being full-time is rising.
“There’s no question these were stronger job numbers,” Hoffman said. “It’s not the type of improvement we’d see if we were heading into another recession.”
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