US jobs numbers: modest gains, a pickup in temp work

Half of the growth of professional and business services jobs came from temporary workers, according to the Labor Department. On balance, the pickup in temp work bodes well for future hiring.

The US economy may be 2.4 million jobs short of its prerecession peak, but there's one segment of the labor force that's riding high: temporary workers.

The ranks of on-call receptionists, customer service representatives, nurses, and others swelled to a new record in May, beating the pre-recession peak in 2006, the Department of Labor reported Friday. And the rate of growth in temp work is ticking up, after declining over the past three years. Temp jobs aren't necessarily well-paid, and their growth reflects an ongoing lack of confidence by businesses in the wake of the federal sequester and Europe's recession. Nevertheless, it represents a positive sign for future hiring, because temp jobs often turn into full-time work.

"Companies are busy. They want to hire, but they're still being cautious," says Scot Melland, president and chief executive of Dice Holdings, which runs specialized career websites in the technology, financial services, and health-care industries. "That's a pretty good indication of the tension that's out there," he adds in a telephone interview.

Overall, hiring in May was in line with expectations for a continuing modest recovery in jobs. The economy added 175,000 nonfarm jobs, the Department of Labor reported. The unemployment rate also ticked up from 7.5 percent in April to 7.6 percent in May, but analysts didn't view it as a negative since it reflected an increase in the number of people actively looking for work.

The strongest hiring in May came from professional and business services, restaurants, and retail trade. Nearly half of the growth in professional and business services came from temporary help services, which added 26,000 jobs.

"It's good to see that start to pick up," says Keith Hall, a senior research fellow at George Mason University's Mercatus Center and a former Bureau of Labor Statistics commissioner. But the sector needs to pick up much more to signal strong job growth. "When you get it up to 50,000 a month, then you start to signal something like 300,000 jobs a month" in overall hiring.

Temporary workers typically serve as a bellwether for the labor market, he says in a telephone interview. They're the first to get dumped when business starts to go bad. They're the first to get hired when business picks up, because companies tend to hire temps until they grow confident enough in the recovery to start hiring full-time workers. In the Great Recession, temp hiring picked up six months before the overall labor market began growing again.

As is often the case, temp hiring started out with a bang, growing at an average 2.1 percent per month for the last four months of 2009. Since then, the pace of growth has declined. Last year, growth averaged only 0.6 percent per month. So far this year, however, the pace has picked up a little to 0.9 percent per month.

And the industry hit an all-time high: 2.68 million workers, eclipsing the previous peak of 2.66 million set in 2006. 

This year, 40 percent of employers expect to hire temporary and contract workers, up from 36 percent in 2012, forecasts CareerBuilder, an online career site. Of those companies, 42 percent expect to hire some of those workers full time.

The trend also points to a longer-term trend: Temps are becoming a more prominent and permanent part of the work force.

"Companies have become very comfortable using temp workers and contractors," Mr. Melland says. "Companies have once again discovered that they like the flexibility."

The trend isn't all positive. Temp workers usually don't get benefits and pay can be low. Of the 17 job areas where temp work is growing fastest, only six offer a median hourly wage above $25 an hour, according to CareerBuilder.  

The growth of low-wage work isn't confined to temp workers. "More than half of the jobs being generated are in low-paying industries," writes Joshua Shapiro, chief US economist for MFR Inc., in an e-mailed analysis. Besides temp work, he points to leisure & hospitality, health-care, and retail trade as hiring low-wage workers.