Temporary Staffing a Leading Economic Indicator

As we've seen in the news, the Jobless rate in the United States has dropped to 10%, down from 10.2% last month. And there was an astonishing decrease in the number of jobs cut by employers during the month of November. Economists originally estimated a loss of 130,000 jobs during the month of November, and boy were they wrong. In Fact, the official number rang in at 119,000 LESS than the estimate. That’s right, last month’s job cuts were “only” 11,000.

This is great news, my friends! Economists also predict this is not a fluke, and jobless rates and job cuts are expected to hold steady. Of course this is assuming they aren’t making another whopper of an error in their estimates again.

Another positive and relatively underrepresented fact is the number of temporary positions that were created last month. For the fourth consecutive month we’ve seen an increase in the number of temporary positions created. Last month alone we saw an addition of 52,000 temporary jobs.

I’m sure you’re asking yourself “So what? Why should we care if temporary positions were created, shouldn’t we be hoping for permanent positions?” Of course we want an increase in permanent positions, but what you may not know is that temporary positions are an extremely reliable leading economic indicator.

What’s a leading economic indicator, you ask? Well in this case it means that when temporary positions start being created we can usually expect, within 6 to 8 months, that we’ll start to see the creation of permanent jobs. And it usually follows suit that when jobs are created, the economy begins to improve. Don’t believe me? Here’s a quote from the American Staffing Association:

“Temporary employment clearly is a leading jobs indicator. ASA and Department of
Labor data show that when temporary jobs begin to decline, employment in general
may be headed for a downturn. Conversely, during recoveries, temporary jobs lead the
way, as the president’s Council of Economic Advisers noted in its February 2004
report to Congress:

Looking ahead, temporary-help services employment—a leading indicator for
the labor market—suggests substantial further employment growth. Average
growth in temporary help services employment over a six-month period has a
striking positive correlation with growth in overall employment over the
subsequent six months…Statistical analysis suggests that an increase of one job in
temporary help services corresponds to a subsequent rise of seven jobs in overall
employment. (emphasis added)12

The correlation between temporary jobs and general employment growth can be seen
in the 2004-2005 recovery period. In 2003, jobs growth was generally stagnant, while
temporary jobs grew by 200,000. The growth in temporary jobs continued into 2004,
presaging the general upturn in job growth that materialized in a significant way in March of that year and that continues today.”
For additional information and to view the article: http://www.americanstaffing.net/legalandgovernment/issue_papers/Staffing_Industry_Positive_Role.pdf


So finally we hear a bit of good news, which is few and far between these days. And I honestly can’t think of a better place to be than Central Texas to weather the economic fallout (well, Hawaii might be nice). I hope you all have a fantastic holiday and stay optimistic! Call or email me with any questions or comments!

Ryan Drake

To inquire about career opportunities or to request a temporary employee, feel free to call or email me.