It doesn’t take much to figure out that the job market is still in the doldrums. Indeed, more than two years have passed since the latest recession ended in mid-2009, but the picture hasn’t gotten that much brighter. The overall U.S. unemployment rate remains stubbornly high, despite signs of a pickup. On the plus side, temporary hiring has been on an upswing since late 2009, giving hope that a labor-market turnaround is at hand. On the downside, it seems the rebound has slowed in comparison to last year. The trend has some wondering what this means for the job market, as well as the recruiters who participate in it.
No doubt, the unemployment situation remains dour. As per the latest jobs report issued by the U.S. Bureau of Labor Statistics, a net 103,000 jobs were added in September, though 45,000 of those gains resulted from the rehiring of certain telecom employees who had been on strike the month before. The temporary help sector improved modestly, too, adding roughly 20,000 jobs. Employment figures for July and August, meanwhile, were revised, with both months showing upward revisions. Nonetheless, the U.S. unemployment rate in September remained stuck at 9.1% (since July). Although an improvement from the 10.1% reached in October, 2009, the latest statistic is quite sobering, considering that the number of people who are jobless is a staggering 14 million. To make a real dent in the unemployment rate, we estimate that the economy would have to create at least 200,000 jobs per month. The current monthly average is less than half that amount.
While the recent job figures helped to ease concerns that another recession would be forthcoming, they probably suggest the economy will grow at a sluggish clip in the coming months. Indeed, given that demand (for goods and services) continues to be lackluster amid a fairly weak consumer spending environment, employers are likely to stay cautious on the hiring front, expanding the workforce at a very measured pace. But, on the flip side, consumers seem reluctant to spend more unless the labor market regains strength. One thing is certain, temp hiring numbers will likely be closely watched in the months ahead.
Typically, temporary hiring heralds a recovery in the labor market, with permanent openings that follow. History tells us that during an economic rebound, employers tend to ramp up the number of part-time workers they take on three to six months prior to hiring them on a full-time basis. So, an increase in part-time staffing is generally a positive sign.
But the trends of late seem to be defying historical patterns. In fact, although temp hiring has been rising, permanent positions haven’t been filled as quickly as anticipated. It seems employers are still continuing to hire on a part-time or contract basis, without taking on employees permanently unless absolutely necessary to do so. That essentially affords employers greater flexibility—hiring a workforce with a specific skill set for a short period of time, but without the financial commitment or burden that would otherwise come with full-timers. This may consequently prevent job growth from accelerating and thus may keep the economy in a rut for a while.
As one would expect, most staffing companies are rebounding slowly, along with the job market. Still, while there’s a great deal of near-term uncertainty, those offering temp-placement services and/or with exposure to sectors where hiring activity appears to be picking up seem to be better positioned to continue to benefit from the upturn, no matter how slow it may be. Staffing giant Manpower (MAN) is seeing a rise in temp-placement orders, as is Kelly Services (KELYA). Robert Half International (RHI) also appears to be enjoying a pickup in both part-time and full-time hiring within the finance/accounting and tech sectors. That seems to be consistent with the jobs data of late, which indicate that the professional/business and technology areas continue to gain momentum.
Healthcare is another segment where temporary and permanent placement activity is edging up. Staffers specializing in this area, including On Assignment (ASGN), AMN Healthcare (AHS), and Cross Country Healthcare (CCRN), are benefiting from an uptick in demand for medical professionals. Thanks to its diverse business platform, On Assignment is seeing strength in its IT and engineering businesses, too.
That said, due to the degree of uncertainty that exists, it’s difficult to predict job growth trends. Temp hiring could slow further and cause the job market to weaken. Or it’s possible that employers will continue to rely on temporary help to get by, making part-time work “the new full-time”. It’s probably safe to assume that the abovementioned stocks will experience some volatility until the situation improves noticeably. That is, until businesses gain enough confidence in the economy and start rehiring on a permanent basis. As such, we recommend only those willing to ride out the bumpy road ahead to park their money here.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.