Temporary workers play an important role in the U.S. economy. They can help fill in for employees who go on family leave, vacations, and sabbaticals while also allowing employers to evaluate potential employees without the long-term commitment. Temp workers can be employed directly by the company they perform services for, but are more typically employed by a staffing agency and deployed to a client to supplement their workforce for limited periods of time.
Staffing agencies often handle some of the prescreening, logistics, and training that can be expensive and tedious to do in-house. Additionally, employers who use temporary workers can also adjust their headcount quickly and respond to fluctuations in workload, allowing businesses the flexibility to match the ups and downs of the business cycle.
Perhaps more importantly, employment of temporary workers can act as a bellwether for overall employment. According to the U.S. Bureau of Labor Statistics, during periods of economic expansion, employers are able to ramp up quickly using temp workers before permanent hires can be made. Conversely, during economic contractions, firms will typically scale back their temporary workforce before reducing their core staff. Notably, a decline in the temporary workforce preceded both the 2001 recession and the Great Recession that began in late 2007.
In March of 2022, temporary workers made up 2.10% of the workforce, the highest share in decades. But since then, the percentage of temporary workers has fallen steadily, and in April 2023, temporary workers accounted for 1.93% of the workforce. The sustained decline in the current temporary workforce could be a sign that broader job losses and a potential recession are on the horizon.
If the expectations of a pending recession are proven true, the industries and occupations that rely heavily on temporary workers could soon scale back their temporary workforces in anticipation of economic…
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