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.
- The severity of the 2008-2009 downturn coupled with the reduced accessibility of credit has made small businesses cautious.
- The economic recovery of late 2009/early 2010 has been shallow (by historical standards), and growth expectations have diminished -- slower growth in output translates to a reduced pace of hiring.
- As businesses deleverage and become more cost-efficient, temporary workers represent a way to avoid the higher costs of permanent employees.
- Temporary hiring enables a business to maintain staffing flexibility, allowing it to adjust more quickly to workload fluctuations and rapid changes in business conditions.
- Limited or no need for employer contribution to workers' compensation insurance or unemployment, no employer liability for Social Security or Medicare taxes and no need to provide job benefits, including health insurance or retirement plans.
- Increased economic and policy uncertainty.
- A wedge of political and regulatory uncertainty.
- Rising health care costs.
- The likelihood of ever more populist initiatives favoring employees at the expense of employers.
- The need for more specialized workers for shorter periods of commitment.
- less buoyant and dynamic domestic economic growth;
- a less consistent rate and more unstable trajectory of domestic economic growth;
- sustained and higher-than-historic corporate profit margins;
- less of a potential corporate commitment to permanent growth initiatives in hirings and in new capital plans;
- less inflows into the domestic stock market through 401(k) plans and other retirement programs;
- dampened consumer confidence; and
- greater demand for renting over home ownership.