Temp Agencies Shed Jobs As Economy Gains Jobs, Grows Wages

Feb 6, 2015

Econ data Jan 2015Temp agencies cut jobs January, shedding 4,100 workers even as the overall economy added  257,000 new jobs, handily beating economists’ predictions the number would be closer to 230,000.

The Labor Department’s monthly Employment Situation report this morning also said unemployment rose slightly to 5.7 percent from 5.6 percent as more workers opted to join the labor force. In addition, average hourly wages increased by 12 cents, the largest gain in months. Wage growth has been stagnant, hovering around 2 percent annually since the end of the recession.

The drop in temp jobs was foreshadowed by the American Staffing Association’s Staffing Index, which at the end of January, was well off its December high. January, historically, is an up and down month for staffing agencies. Of the last 10 years, temp agencies have shed jobs in six, the result of reductions in seasonal staffing.

Executive search firms also reported fewer workers. In December, the most recent month available, search firms employed 39,500 workers, down by 400 from November and off 1,100 from a high of 40,500 in October. Placement agencies grew to 274,800 workers, a gain of 1,600 over November. PEOs declined slightly to 357,400, a loss of 600 jobs since November.

While the overall Labor Department report for January offered much good news for economists and for Federal Reserve policymakers, who have expressed concern over slow wage growth, it will take another month or two for the significance of the January numbers to become clear.

Between the annual exit of workers hired as seasonal help for the holidays, and the Labor Department’s yearly statistical adjustments to its data, January has historically proven to be a difficult month to read. Bad weather also can skew the data, if it occurs during the department’s survey period.

In a note to investors in advance of this morning’s numbers, Jim O’Sullivan, chief United States economist at High Frequency Economics, warned, “Be wary of January payrolls data. While the data are noisy in general, limiting the information value of a single reading, the seasonal adjustment process is especially challenging in January.”

These statistical adjustments, announced simultaneously with the January jobs counts, added 147,000 jobs to the initial numbers for November and December, bringing the two month total to three-quarters of a million new jobs. For the year, the Labor Department’s job count increased from 2.952 million new jobs to 3.197 million.

According to the January report, most sectors of the economy showed job increases. The only significant reduction was in government workers, with the post office shedding 6,100 jobs. In the private sector:

  • Construction increased by 39,000 jobs, with residential construction and the residential trades adding 20,100;
  • Manufacturing rose by 22,000 workers;
  • Retail added 45,900 with automotive and parts dealers and sporting goods and smaller specialty retailers growing the most;
  • Healthcare jobs grew by 38,300, with the largest share (21,700) added in doctors’ offices and other ambulatory health centers;
  • The professional and technical services category, which includes accountants, architects and engineering firms, and computer design and related services, adding 32,500 workers.
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