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Kass: The Decade of the Temporary Worker

Stocks in this article: MAN RHI

This blog post originally appeared on RealMoney Silver on Aug. 2 at 8:15 a.m. EDT.

U.S. corporations have a renewed emphasis on temporary hirings at the expense of permanent job placements.

Years ago, inventory on-demand solutions arose at manufacturing companies around the world, resulting in improved returns on industrial invested capital and corporate profitability both in the U.S. and abroad.

Not surprisingly, today, the trend of a broader use of temporary workers is the next generation of return optimization in an age of broad uncertainty and a wider-than-usual set of economic outcomes.

Prior to the 2008-2009 Great Decession, temporary employment growth has signaled permanent hiring strength.

The chart below plots the year-over-year percentage change in temporary jobs in the U.S. against the overall rate of change in overall nonfarm employment.

Temporary Jobs Lead Overall Employment Gains
U.S. Bureau of Labor Statistics
CLICK HERE FOR FULL VIEW

Out of the 1990 recession, temporary jobs first began consistent positive year-over-year growth in December 1991. Overall nonfarm employment turned positive four months later (April 1992).

Following the 2001 recession, the "jobless recovery" produced a sputtering in temporary job growth throughout all of 2002 and did not post positive percentage growth until mid 2003. Six months later, total employment exhibited year-over-year growth.

In the current recovery, temporary jobs crossed into the positive growth region in January 2010 and then surged into double-digit growth with gains of 19.4% in June, following year-over-year rises of 16.9% in May and April's 14.6%, but total nonfarm employment has yet to grow year over year, since the series first turned negative 26 months ago (May 2008). The job loss was under 1% in June, however, and the chart above suggests that total employment will cross into the year-over-year positive region soon. As of now, the lag is five months, still shorter than the six-month lag between temp jobs and all jobs year-over-year recovery in 2003. If the lead-lag relationship holds up this time, year-over-year U.S. job growth should become positive sometime in the second half of the year, but the growth will likely be modest relative to past cycles of employment growth.

In other words, a rise in cyclical unemployment appears to be morphing into structural unemployment in the U.S.

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