We can trace a number of reasons behind the movement that favors temporary workers:
  • 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.
What are some of the ramifications of this new era of temporary job growth?
  • 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.
This trend warrants a closer look at the shares of Manpower ( MAN) and Robert Half International ( RHI), the two largest temporary employment companies.

While, historically, the rise in temporary job growth (above chart) signals a broader improvement in the employment markets, I am less certain in the current cycle and, for that matter, over the course of the next few years.

Economic bulls have been incorrectly predicting stronger jobs growth since fourth quarter 2009.

They have been disappointed and are likely to continue to be disappointed in the decade of the temporary worker.

Doug Kass writes daily for RealMoney Silver , a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.
At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.

Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

If you liked this article you might like

Automation Threatens Some Staffing Agencies According to Credit Suisse

20 Mid-Cap Dividend Growers Are Blips on My Tracking Radar

The Art of Setting Price Targets

Taking Points - or Profits - Off the Board