The Hidden Danger in Last Week's Jobs Report
Life + Money

The Hidden Danger in Last Week's Jobs Report

REUTERS/Frank Polich

During the past four years, more and more Americans are clinging to the lowest rung on the corporate ladder: they’re temping.

No other major subset of the workforce has generated as much growth—45.8 percent—over the past four years, according to the Bureau of Labor Statistics. Temps account for one of every four jobs created since President Obama’s first summer in the White House. Another 14,100 found short-term gigs last month, the bureau said Friday.

When the government jobs report gets released each month, most eyes go directly to the unemployment rate and the change in payrolls—two figures that often get treated as a political Ouija board for the November presidential election.

But buried deeper in the report, based on the establishment survey, is a breakdown of job creation by industry—and this is where the classification “temporary help services” serves as evidence of the fragile but steady recovery and a harbinger of the dangers that await.

“Arguably, those aren’t the types of jobs we’re hoping to create,” said Alex Brill, a research fellow at the conservative American Enterprise Institute who was previously chief economist for the House Ways & Means Committee. “It suggests that there is a little more demand for workers, but companies aren’t willing to make the commitment for permanent employees.”

There’s good reason for companies to hesitate on hiring full-timers. With the White House up for grabs and Democrats and Republicans readying for a showdown on the fiscal cliff—a combination of expiring tax breaks and automatic spending cuts—no one is sure of just where the economy is going.

“It’s consistent with a general sense of uncertainty that employers are feeling,” Brill said. “You can tie it back to the fiscal cliff. Employers are uncertain about future tax policy, the election, and the current fiscal path—other than the fact that it’s unsustainable. It’s a way to hedge if things don’t go well.”

Needless to say, temping provides little in the way of security. In 2011, jobs generally lasted for less than three months and the amount of turnover has increased substantially, according to a survey released in March by the American Staffing Association.

More than 2.5 million Americans are now hired as temps. That’s three times more than the number building automobiles—an issue at the core of the presidential campaign because of Ohio’s swing state status and the administration’s restructuring of General Motors and Chrysler.
Out of all the other industries, only health care generated a comparable boost in employment. All of its subsets combined—doctor’s offices, outpatient care centers, hospitals and nursing homes—produced 820,00 jobs since July, 2009, according to the BLS.

But neither Obama nor Mitt Romney is devoting much attention to this growing sliver of the economy.

The president prefers to stump on the possibility of a manufacturing renaissance, paying down the deficit by raising taxes on the wealthy, and the plight of local and state governments, a crisis Obama claims would end if Congress just passed the $35 billion rescue package he proposed last September.

Obama famously bungled his argument about bailing out local governments at a June 8 news conference by saying, “The private sector is doing fine.  Where we’re seeing weaknesses in our economy have to do with state and local government.”

The data shows that no sector of the economy has slimmed down its payrolls as much as the government and that’s helped drive up the unemployment rate to 8.3 percent.

States have shed 101,000 workers over four years, as local governments let go of a staggering 484,000 employees. The financially crippled U.S. Postal Service has thinned its ranks by 92,000.
Combined, the layoffs are three times greater than the job losses in home construction during the same period. The unemployment rate would dip into the 7 percent-range without the government downsizing.
But in a campaign increasingly defined by gaffes, Romney—instead of making a policy argument—pounced on Obama’s misstatement about the private sector “doing fine” with a blunder of his own.

 “He wants to hire more government workers,” Romney said in Iowa. “He says we need more firemen, more policemen, more teachers. .... It’s time for us to cut back on government and help the American people.”
The Republican challenger later clarified his remarks on Fox News by suggesting his comments pertained to his objections about additional federal stimulus, rather than the kinds of professions that most voters consider to be the backbone of the country.

Yet should the economy appear to veer back into a recession, both candidates might want to flip to Table B-1 in the jobs report and study what happens with temps. They will likely be the same canary in the coalmine that they were when the economy began to crumble in 2007. 
“Temp workers are, of course, the first ones to get let go when demand starts to flag,” said Heidi Shierholz, a labor economist with the progressive Economic Policy Institute.

However, for now, their growing share indicates an economy that is slowly and painfully healing—one of the few positives amid the headlines about the fiscal cliff and Europe’s sovereign debt woes leaving the continent in a perpetual crisis.

“I’m not yet worried,” Shierholz explained. “Growth in temp help is something to keep an eye on but at this point is still unambiguously good news.”