As firms still fret, temporary hires fulfilling demand

Compared with past recessions, adding permanent workers lags

— The hiring of temporary workers has surged, suggesting that the nation’s employers might soon take the next step by bringing on permanent workers. But first companies must convince themselves that the upturn in the economy will be sustained.

As demand rose after the past two recessions, in the early 1990s and in 2001, employers moved more quickly. They added temporary workers for only two or three months before stepping up the hiring of permanent workers. Now four months have passed, the economy is growing, and corporate managers have been reluctant to shift to hiring permanent workers. Temporary workers and other casual labor are more easily shed if demand slows again.

“When a job comes open now, our members fill it with a temp, or they extend a parttimer’s hours, or they bring in a freelancer - and then they wait to see what will happen next,” said William Dennis Jr., director of research for the National Federation of Independent Business.

The rising employment of temporary workers is not all bad. However uncertain their status, they do count in government statistics as wage-earning workers, adding to the employment rolls and helping to reduce the monthly job loss to just 11,000 in November. Also, the unemployment rate fell in 36 states in November, the Bureau of Labor Statistics reported, partly because of the growing use of temporary workers.

The U.S. rate was 10 percent in November, two-tenths of a percentage point below the October rate, while the rate in Arkansas was 7.4 percent, also down two-tenths.

The Bureau of Labor Statistics, which issues the monthly employment reports, does not distinguish between permanent and casual employment, with one exception: It has a special category for temporary workers, the men and women supplied by Manpower, Kelly Services, Adecco and other agencies.

Last month 52,000 temporary workers were added nationally, greater than the number of new workers in any other category. Not even health care and government, stalwarts through the long recession, did better.

“Sometimes we’re asked by a company to bring back ex-employees as temps,” said Joanie Ruge, a senior vice president of Adecco. Some are even ex-employees who have been laid off. “That does happen,” she said.

In the past, temporary workers who do well have often been offered regular employment, with higher pay and benefits. Given the uncertainties about this recovery, companies are not doing that now, and temporary workers, as a result, are less likely to spend as freely as regular employees or to qualify for credit, generating less demand than permanent employment would.

Adding to this undertow, corporate America is investing little in expansion at a moment when current capacity - the machinery and floorspace now available - is underused. And pressure is rising on the Obama administration and Congress to offset the shortfalls by authorizing more stimulus spending to continue lowering national unemployment.

“Depression has been forestalled only because major government borrowing and spending is filling the gap,” Albert Wojnilower, a Wall Street economist and consultant atCraig Drill Capital, said in a newsletter this month.

Caution in hiring is the watchword at Eggrock, which makes prefabricated bathrooms in Littleton, Mass. During the summer, Eggrock received its first new order since the recession began: 462 units for a hospital project in Canada.

The order caught the company with only 10 workers on the factory floor, down from 45 early last year. But rather than recall those who had been laid off, Eggrock arranged for 40 temporary workers from Manpower: plumbers, electricians, assemblers and the like.

“The biggest factor in prompting us to shift from temps to permanent employees would be a solid order backlog,” said Phillip Littlefield, a vice president at the company. So far a backlog has not materialized, or even a second order, although there is an “uptick in interest,” as Littlefield put it. “We are optimistic,” he said.

Halfway across the country, in Burlington, Iowa, the recession bypassed the Winegard Co. That is perhaps because Winegard makes television antennas and satellite receivers, and in hard times people watch more television, said Denise Baker, Winegard’s director of human resources. Whatever the case, to keep up with new orders, the company has added 70 workers in the past two years - all of them temporary.

“An actual employee with benefits costs more than a temp or a contract worker,” Baker said, “and as long as I can still get highly skilled temps, I’ll go that route. It gives me more room to reverse course if theeconomy weakens again and sales do finally sink.”

Given the nature of the upturn, that could happen. After 18 months of contraction, the economy expanded from July through September at a 2.2 percent annual rate, and many economists expect the expansion to be stronger in the fourth quarter, approaching 4 percent. The rebound benefits from a “turnaround in inventory policies from breakneck liquidation to slow accumulation,” Wojnilower said.

If this restocking of shelvesand warehouses were to stop or slow next year, a possibility that concerns Littlefield and Baker, then the temporary workers, freelancers and contract workers they and many other employers now use would have a harder time moving from casual to regular employment.

The temporary agencies often promote themselves as employment agencies - skilled at quickly finding qualified workers whom companies can convert to regular employment after using them initially as temporary workers.

Business, Pages 49 on 12/27/2009

Upcoming Events