Temp Work Flashes Warning

Flat staffing suggests broader job-market slowdown may be ahead.

One of the labor market’s early-warning signs may be flashing trouble.

Hiring by staffing agencies has ground to a halt so far in 2016, a worrisome sign because the category fell off before a broader job-market slowdown ahead of the past two recessions. Many economists look at the sector as a leading indicator because cautious firms tend to first hire temps when an expansion begins and dismiss those nonpermanent workers when they sense the economy is faltering.

The question now is whether the recent flattening in temp employment points to another economic downturn or is just respite for an industry that has capitalized on a shift toward flexibility for workers and firms.

More than one in 50 U.S. workers were employed as temps at the end of 2015, eclipsing a record set in early 2000. At that prior peak, the unemployment rate was near a cyclical low and payrolls were growing steadily, albeit at a slightly slower rate than the prior two years. By spring 2001, the economy was in recession.

“It’s the first sector that really begins to lose jobs,” said Donald Grimes, a labor economist at the University of Michigan. “If you start seeing those numbers go negative, you’ve got a real problem.”

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