Employers Forecast to Increase Use of Temp Agencies By 10.5%

Staffing agency employment has been among the fastest-growing sectors of the U.S. economy for the last several years. Since the recession’s official end in June 2009, the industry has added 1.24 million new jobs, 12.3 percent of all new private sector jobs created.

Now comes a prediction from the staffing and human capital consulting firm of G. Palmer and Associates that temp employment will grow 10.5 percent this quarter over last year. That translates into about 135,000 new staffing agency jobs.

“Our forecast for the 2015 first quarter follows recent trends demonstrating growth and indicating another increase in demand for temporary workers, marking the 20^th consecutive quarter of year-over-year increases,” said Greg Palmer, founder and managing director of the consultancy.

The predicted year-over-year growth is a big percentage, even for as fast a growing jobs sector as staffing. But it’s not the first big forecast the Newport Beach, California, firm has made. In 2010 Palmer predicted demand for temp workers would increase 20.9 percent in the last quarter of the year. The prediction was off, but only some. Temp growth that quarter grew 19.2 percent.

What makes this quarter’s forecast so audacious is that temp agency employment is approaching the 3 million mark, according to the latest numbers from the U.S. Bureau of Labor Statistics. To achieve the year-over-year forecast, the industry will have to add about 135,000 jobs during the quarter. That’s an astonishing number; twice what the industry adds in a typical quarter. In the best quarter of the last four years — the fourth quarter of 2013 — staffing grew by 70,700 jobs.

The temptation is to believe the forecast is just too aggressive. A number of factors suggest it could be right.

First, the Palmer firm’s track record over the last several years has been almost spot on. There have been misses of course. Generally, though, the forecast falls within a 5-10 percent — and often less — range of being on the money.

Second, several surveys of hiring intention found large numbers of employers planning to hire in the first quarter and during the year. CareerBuilder’s survey found 46 percent of employers planning to add temp and contract workers in 2015, almost a 10 percent increase over last year.

There’s also a possibility the actual number of hires may end up being less, once the BLS issues its annual adjustments to the job counts next month.

Nevertheless, all indications point to a strong continuing growth in the use of staffing agency workers. As Greg Palmer noted in the forecast announcement, “One of the most revealing indicators to watch during this uneven recovery relative to temp help growth is the temp help penetration rate, which is significant because it measures temp help as a percentage of total employment. In December, the penetration rate remained at an all-time high of 2.10 percent of the total labor market from a low of 1.34 percent in June 2009.”