Last week's employment report was by most measures disappointing. The Labor Department reported Friday that the nation's employers cut 131,000 jobs last month -- many more than the drop of 60,000 positions anticipated by analysts. Moreover, job creation was less robust than expected, with the economy creating only 71,000 new jobs in July, fewer than the 100,000 that experts had predicted.
Adding to the pain, June jobs cuts were revised upward, adding nearly 100,000 to the decline of 125,000 reported a month ago.
Unusual Loss of Temp Jobs
Then there was one inexplicable part of the report: a drop in temporary employment. After adding temp jobs every month since September, the number of temporary workers fell to a loss of 5,600 jobs last month. The decline is at odds with the cycle of economic recovery, which generally sees an increase in the number of temp workers as employers ramp up to meet growing demand. Companies generally hold off increasing the size of their permanent workforce amid a nascent recovery, fearing they may just have to lay workers off should the economy downshift.
The loss in temp jobs also isn't consistent with what many staffing firms are witnessing in recent weeks, says Tig Gilliam, chief executive at Adecco Group North America, a unit of Switzerland-based Adecco (AHEXY), the world's largest staffing company.
"I have to think the temporary staffing number is more of an anomaly in the month than it is a trend," he says. Adecco has seen its business grow, Gilliam says, and he believes that's emblematic for the industry as a whole. "I don't think we're that different from the broader temporary employment base."
Temp Hiring Not Yet Converting to Permanent Hiring
Adding to the puzzlement, the recovery has heretofore followed a typical pattern: an increase in hiring for temp workers in the industrial sector, followed by a rise in the number of professionally skilled workers. An issue that still concerns Gilliam is that the temporary hiring of professionals, in fields such as information technology, consulting and engineering, hasn't yet resulted in permanent hiring of those workers.
"That's where we're lagging," Gilliam says, which is why Friday's report only showed a gain of 71,000 jobs instead of, say, 271,000 jobs. The good news is there is growth in hiring among private employers, he says. The bad news is that it's not as fast as it should be.
But it isn't only private employers who are holding off hiring. Cash-strapped states and cities, which often rely on temp workers, are facing tough times, too. Further, temp hiring by the federal government related to the 2010 Census has run its course, and those positions have ended.
Private Sector Must Lead
On Thursday, the Senate pushed through $26 billion in funding to help states, many of which are facing huge shortfalls. It's a common theme that states are looking for more federal help, Gilliam says, especially in the wake of cuts in federal support. The House is expected to reconvene this week to vote on the measure, after adjourning for the August recess.
Still, the economy can't rely on government hiring to lead the jobs recovery, Gilliam says. "It's got to be private sector employment."
Unemployed workers, especially those who have been out of a job for a long time, would welcome any answer at this point. But given the pace of the recovery, it doesn't seem likely that hiring -- by either companies or governments -- will spike anytime soon.