November 4, 2011 / 4:02 PM / 8 years ago

Analysis: Temp staffing hints at moderate job gains

(Reuters) - Steady demand for U.S. temporary workers, a leading indicator of wider employment trends, suggests an acceleration in new jobs is still not in the cards.

Staffing industry analysts and insiders say October’s increase in U.S. payrolls is consistent with a slow growth environment but see little evidence that economic growth is about to pick up. For every positive indication, such as higher orders from retail clients, there is a balancing, negative piece of news, suggesting the pace of moderate jobs growth is likely to persist into next year.

“We’re going sideways, really,” said Tig Gilliam, who heads North American operations for Adecco SA, the world’s leading staffing agency. Although the unemployment rate dipped to 9 percent in October, it is going to take significantly stronger jobs growth to push it down to the 8-percent range, he said.

Adecco is seeing a seasonal ramp-up in demand for temporary workers, but that is offset by factors like disruptions to industrial supply chains from flooding in Thailand. In some cases, manufacturers who cannot get parts are canceling orders for temporary workers with just a few days’ notice.

“The way the summer slowed down, I was concerned we wouldn’t see the seasonal pick-up — but that has happened,” Gilliam said. “On the downside, we’re definitely seeing the impact from flooding in Thailand. It’s always something.”

The U.S. economy added 80,000 non-farm jobs last month, below economists’ forecasts, but growth in the prior two months was revised significantly higher. That prompted some economists to say the jobs market was improving.

(For a graphic of the unemployment rate, see link.reuters.com/tef84s )

STEADY DEMAND

Temporary payrolls are a leading indicator of labor market trends because demand for temps typically rises before a recovery, or falls before a downturn. It is easier and cheaper to add or cut temporary workers than to lay off permanent staff.

Staffing industry executives have argued in recent months that a double-dip recession was not likely because their orders had not fallen off, like they would if a recession were coming.

Temp jobs typically rise from September to October but the increase last month was a little stronger than it has been historically, said analyst Jeff Silber of BMO Capital Markets.

Still, the percentage of temps in the U.S. labor force, at 1.75 percent, remains well below 2000’s peak of more than 2 percent. The level of demand is consistent with an economic “soft patch,” Silber said in a note to clients.

Job orders at Randstad Holding NV’s U.S. arm have been steady, said Joanie Ruge, Senior Vice President and the chief employment analyst.

“We haven’t seen any large declines but we’re not seeing a large uptick either,” she said, adding that the typical boost in demand for temp workers from the retail sector was a little stronger this year.

“Retailers are forecasting higher demand and they’re putting in orders for more temporary labor for the holiday season,” Ruge said.

Staffing shares were modestly lower across the board on Friday. In European trading, Adecco fell 1.2 percent in Zurich, while Randstad lost 2.5 percent in Amsterdam.

In U.S. trading, world no. 3 staffing company ManpowerGroup fell 1 percent. The company on Thursday said its board authorized the buyback of 3 million shares. Other U.S.-listed staffing shares were down by between 1 and 3 percent.

Reporting by Nick Zieminski in New York; Editing by Tim Dobbyn

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