Temp worker employment is falling. What does that mean for the U.S. economy?
Temp worker employment is falling. What does that mean for the U.S. economy?
As Federal Open Markets Committee members turn their attention from this week’s interest rate decision to September’s, the upcoming employment report from the Bureau of Labor Statistics will be closely watched for signs of labor market cooling.
In last month’s release, the June jobs report, one industry shed more workers than any other: temporary help services. There were almost almost 49,000 fewer people employed in that industry in June than there were the month before.
Declines in temporary help services employment preceded recessions in both 2001 and 2008. Despite that, economists say the current trend in temporary help services might not be all that alarming.
“Some of it might just be self-correction at this point,” said Veronika Dolar, an associate professor of economics at Pace University.
Temporary help services employment surged during the pandemic, peaking at 3.1 million workers in early 2022 and has been on an almost uninterrupted decline since then. “I think maybe we overdid it,” Dolar said.
Though temporary help service workers can fill jobs in a range of industries — from parking attendants to farm workers and high-paid managers — the biggest category is transportation and material moving occupations, which accounts for more than 25% of the whole.
During the pandemic, as Americans bought bought unprecedented levels of goods online, many companies turned to temporary workers to fill the demand for warehouse workers, and truck and delivery drivers.
The downward trajectory of temporary workers we’re seeing now could be explained by weakening in those industries, said Dante DiAntonio, a senior director in the economic research group at Moody’s Analytics. “The first thing they’re going to do is they’re going to cut those temp help workers right before they lay off their permanent employees.”
Temporary help service employees have now dropped below pre-pandemic levels.
“It has dropped more than any other sector of the workforce,” said Louis Hyman, an economic historian at Johns Hopkins University who’s written a book about the temp industry. “But I don’t think the story is as bad as it might seem.”
One job lost in the temp industry does not necessarily translate to one job lost in the economy.
“It very well could be the case that many of these people are moving from temporary work in a warehouse into more permanent positions — which is, of course, good for them and is not a sign that the economy is going in a bad direction, but it’s solidifying,” said Hyman.
That said, uncertainty remains about this particular category of workers. “I think temp agency workers are almost certainly being undercounted,” said Geroge Gonos, a researcher at SUNY Potsdam who studies temporary work.
He said how the Bureau of Labor Statistics categorizes some workers can obscure how many people have temporary jobs.
For example, if someone is employed by a temporary staffing agency specializing in information technology staffing, that worker will be classified as an information technology worker — not a temporary help services employee, even if their job is temporary.
“Their employees are counted in the sector where they are sent to work,” said Gonos. “So they’re also missing in the count of temp agency workers in the BLS statistics.”
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