Do Temp Jobs Lead to Permanent Hiring or Not?

by SixFigureStart | February 16, 2010

  • My Vault
Is this bad news or just idle speculation because there hasn't been enough bad news to go around of late? USA Today is reporting that "Use of temps to fill jobs may no longer signal permanent hiring."

According to the article, "[c]ompanies have hired more temps for four straight months. But they remain reluctant to make permanent hires because of doubts about the recovery's durability."

Worse, it seems, is this quote from Wells Fargo's Chief Economist, John Silvia: "Companies aren't testing the waters by turning to temporary firms. They just want part-time workers."

So what's the deal? Has fear really gripped the hiring market to the extent that companies won't create the jobs they think they need to stimulate growth? The figures supplied by USA Today certainly seem to suggest that's what's happening, but perhaps they warrant a closer look:

"After the 1990-1991 recession, for instance, gains in temporary hiring starting in August 1991 led almost immediately to stepped-up permanent hiring. And after the 2001 recession, temporary hiring rose for three straight months in the summer of 2003. By September, employers were adding permanent jobs each month."

Far be it for me to second-guess some of the esteemed economists cited in the article, but we do seem to be missing one rather large piece of evidence here: neither of the two recessions referenced in the quote were anywhere near as severe as the one we've just emerged from, or witnessed a fraction of the job destruction. In that respect, the headline of the piece may be correct, but only to the extent that we understand that unprecedented economic times also create unprecedented conditions for attempting a recovery. In that light, pointing to four straight months of companies adding temps as a bad sign for permanent hiring seems a little premature—especially when your benchmark from the previous recession is only one month less.

--Posted by Phil Stott, Vault.com

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