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Blip or Omen? Divining the Significance of the March Jobs Numbers

by Apr 12, 2012, 11:07 am ET

While all eyes last week were focused on the disappointing March job numbers from the U.S. Bureau of Labor Statistics, the report contained a curious blip that might be nothing more than a statistical aberration. Or it could be an early signal of employment trouble ahead.

The usually robust growth in temp jobs took a breather in March. Temp jobs dipped by 7,500 during the month, the first time since June the monthly employment report registered a decline. Out of a temp workforce of some 2.5 million, the drop is practically unnoticeable. But considering that staffing jobs grew by 91,300 in January and February, a reduction of any size is significant.

Recent history is also a factor. Looking at April 2011, the monthly jobs report said 251,000 jobs were created, the biggest rise since the census hiring of 12 months earlier. But that same report also showed the first decline in temp jobs in 19 months. Then in May, the economy added a mere 54,000 jobs. It was months before the pace of hiring returned to what it was in the first quarter of the year when 662,000 jobs were created.

Cautious employers can be forgiven therefore if they react as if last week’s Labor Department report were an omen.

Here, though, is where reading the economic tea leaves gets dicey: There were 8 percent more temp and contract jobs in March than a year ago. That’s well ahead of the overall jobs growth rate, which, in a year-over-year comparison comes to just under 1.4 percent. And then there’s the non-seasonally adjusted numbers to consider. While the headlines and most economists focus on the seasonally adjusted numbers, the U.S. Labor Department’s Bureau of Labor Statistics issues a second set of numbers that are the raw results of its job counts. (A detailed explanation of the differences between the two is available here. The short version is that the adjustment removes some of the effects of seasonal events like weather, and holidays, and school years from the numbers.)

Using the unadjusted numbers, the staffing industry added 29,400 jobs in March. Year-over-year, the increase in temp and contract staffing hit 8.5 percent. For comparison, the unadjusted numbers put the total new jobs count at 81,100 last month.

“For the most part, staffing firms continued to see healthy demand in March, as was reflected by the nonseasonally adjusted BLS employment numbers,” says Richard Wahlquist, president and chief executive officer of the American Staffing Association. “In the current environment, businesses are understandably cautious about when and how to add additional flexible and permanent staff.”

While temp hiring is one of the early indicators of a job recovery, and the pace of temp hiring offers insights into what the future may hold, other signs offer a little more optimistic view than does a single month of data. Before last week’s report, CareerBuilder offered an upbeat view of employment in the current quarter. After surveying some 2,300 HR professionals and hiring managers, CareerBuilder says 30 percent of employers plan to increase their full-time, permanent workforce. Even more — 34 percent — expect they’ll bring on more temps and contract workers.

In Q1, 37 percent of employers hired more temps, an eight-point increase over the 29 percent who hired temps in Q1 last year. The company also says 31 percent of employers report not being to find qualified employees to fill open jobs. That’s up from the 24 percent who said that last year.

Two other bits of government recruiting industry data are worth noting. One is the month-to-month count of workers employed in executive search; the other is the count of those working at placement agencies. Counted in this latter category are employees of chauffeur services, nurse registries, employment firms, state job service offices, casting agencies, and the like.

Unlike staffing hires, the changes in these industry segments are of dubious predictive value. However, the number of workers employed in both categories has been going up. In February, there were 31,500 workers employed by search firms. That’s 700 more than the average for all of last year. (The data for these sectors runs a month behind the national jobs numbers.)

The challenge in looking at employment in search firms is to decide how much of the change is impacted by corporate in-sourcing of search, versus economic belt-tightening, versus business expansion. In that light, it probably is of significance to note there are more jobs at executive search firms today than at almost any other time in the last 10 years. From that, it seems safe to say that whatever trend there is for corporations to in-source their executive and other hard-to-fill positions, it hasn’t impacted search firms as much as some thought.

Placement agencies have also added workers, though divining the significance is tricky because some placement services — government offices, for instance — added workers to assist the unemployed as the economy was tanking. That said, there is evidence that employment in this category does move in some rhythm with general economic conditions. In 2007, just before the official start of the recession, there were an average of 277,400 workers. Two years later, the average fell to 200,200 workers.

Jobs began returning early in 2010 and the growth continued in all but two months of last year. As of February, there were 240,800 workers employed in the employment placement agencies category.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • Keith Halperin

    Thanks, John. Looks like it’s time for this again:

    Recent Economic Forecasts: last updated: 04/06/2012
    http://myweb.rollins.edu/wseyfried/forecast.htm

    Wells Fargo Securities Economic Forecast (latest monthly forecast, March 2012; latest forecast, April 6-latest weekly analysis):
    economic growth = 2.5% in 2012Q1 and 1.5% in 2012Q2; 2.1% in 2012 and 2.2% in 2013; core CPI inflation = 2% in 2012 and 1.9% in 2013; CPI inflation = 2.6% in 2012 and 2.3% in 2013; unemployment rate rises to 8.6% in 2012Q3 before dipping to 8.5% by end of 2012 and 8.1% by the end of 2013

    Morgan Stanley (March 30):
    economic growth = 2.25% in 2012, 2% in 2013

    CNN-Money (March 29, 2012):
    economic growth =2.1% in 2012Q1, 2.5% in 2012, 2.9% in 2013; unemployment rate = 7.9% by end of 2012

    OECD Economic Outlook (March 2012):
    economic growth in US = 2.9% in 2012Q1, 2.8% in 2012Q2

    Economic forecasting survey, Mar 2012 (WSJ):
    economic growth = 2% in 2012Q1, 2.4% in 2012, 2.7% in 2013, 3.1% in 2014; unemployment = 8% at end of 2012, 7.5% at end of 2013, 6.8% at end of 2014; inflation = 2.2% in 2012, 2.3% in 2013 and 2.6% in 2014; Fed begins raising interest rates in second half of 2013; 16% chance of recession in US in 2012; 41% chance of a country leaving the eurozone in the next year

    Univ. of Michigan Economic Forecast (executive summary – Mar 16, 2012):
    economic growth = 2.3% in 2012 and 2.6% in 2013; core inflation (CPI) = 2% in 2012 (overall inflation = 2.2%) and 1.8% in 2013; unemployment rate declines to 8% by end of 2012 and 7.7% by end of 2013

    Survey of Professional Forecasters (latest survey Feb 2012): economic growth=2.2% in 2012Q1, 2.3% in 2012Q2; 2.3% in 2012, 2.7% in 2013, 3% in 2014; core inflation (PCE)=1.6% in 2012 and 1.8% in 2013 (overall PCE inflation=1.9% in 2012, 2% in 2013); unemployment rate=8.1% in 2012Q4; average unemployment rate = 7.9% in 2013, 7.4% in 2014

    OMB (Feb 2012 – see pdf page11-13):
    economic growth = 2.7% in 2012, 3% in 2013 and 3.6% in 2014; unemployment (Q4) = 8.8% in 2012, 8.6% in 2013, 7.8% in 2014; inflation = 2.2% in 2012, 1.9% in 2013, 2% in 2014; natural rate of unemployment = 5.4%, growth in potential GDP = 2.5%; see pdf page 13 for comparison with other forecasts

    CBO (January 31, summary):
    economic growth = 2% in 2012, 1.1% in 2013 (assuming the expiration of tax cuts); unemployment close to 8.9% at end of 2012, rising to 9.2% by end of 2013 (assuming expiration of tax cuts); unemployment doesn’t decline below 7% until 2015Q4; core PCE inflation = 1.4% in 2012 and 1.3% in 2013; growth in potential GDP under 2% for 2012 and 2013, 2.1% & 2.3% for 2014 & 2015, before settling back to about 2.5% afterwards; natural rate of unemployment = 5.5% (don’t reach that rate until 2018)

    Fed Forecast as of January 2012:
    economic growth = 2.2-2.7% in 2012, 2.8%-3.2% in 2013, 3.3-4% in 2014; long-run economic growth = 2.3-2.6% (note: these are from 4th quarter to 4th quarter); unemployment rate = 8.2-8.5% in 2012, 7.4-8.1% in 2013, 6.7-7.6% in 2014 (estimates are for 4th quarter of the respective year); natural rate of unemployment = 5.2 to 6%; inflation as measured by core PCE index of 1.4 to 1.8% in 2012, 1.5-2% in 2013 and 1.6 to 2% in 2014; Fed adopts a policy of inflation targeting with a long-run goal of 2% overall inflation as measured by the PCE index

    IMF (January):
    US economic growth = 1.8% in 2012, 2.2% in 2013

    NABE January survey (Jan 23-CNBC):
    economic growth = 2.4% in 2012

    Quarterly economic survey (USA Today – Jan 22, 2012):
    economic growth = 2.2% in first half of 2012; unemployment rate = 8.4% by end of 2012

    World Bank Global Economic Forecast (Jan 17):
    US economic growth = 2.2% in 2012, 2.4% in 2013

    Livingston Survey (latest survey – Dec 2011):
    economic growth = 2.1% in first half of 2012 and 2.5% in second half of 2012; unemployment rate = 8.9% in June 2012 and 8.7% in Dec 2012; inflation (CPI) = 2.2% for 2012 and 2.3% for 2013; long-term economic growth = 2.6%, inflation averages 2.5% over the next decade