The temporary help sector continued to add jobs in February, a potential sign of an imminent recovery in hiring, but the pace of growth is not yet strong enough to eliminate the possibility of a double-dip recession.
Staffing industry executives say demand for temporary workers is broadening and they expect temp hiring to accelerate in coming months. But they caution that headline job numbers may not show growth until the second half of the year, and even then hiring is likely to be up gradually.
Last month, fewer jobs than expected were lost outside the farm sector, down 36,000, and the unemployment rate held steady at 9.7 percent. The temporary help services sector added 48,000 jobs in February, after adding 50,000 jobs in both January and December.
Temp jobs posted their first year-over-year increase since March 2007, and the percentage of temporary workers in the labor force rose to 1.55 percent. Analysts say such metrics correlate with the end of recession.
The government is likely to show 100,000 or more temp jobs created in coming months, said Tig Gilliam, who heads North American operations at Adecco SA, the world's biggest staffing group and one of the largest employers in the United States after Wal-Mart and the postal service.
"I don't really see that much has changed," Gilliam said. "The temporary numbers are coming back, the average work week is improving. Those are the beginning of a recovery."
Temporary hiring typically precedes permanent hiring as employers try to maintain a flexible workforce. They are often reluctant to commit to filling a full-time job until they are more certain their business has recovered.
Obstacles to hiring include tepid consumer confidence and uncertainty over political issues like proposed healthcare reform from Washington, Gilliam said.
"Do I sense from clients that they're confident there's no possibility of a double-dip? I'd say no. That's why we're seeing the caution."
Gilliam said temporary job growth preceded headline job growth by about 12 months in the 1980s recession, but it took 24 months to have both permanent and temporary jobs growth in the 1990s recovery, and the lag was even longer after the 2001 recession.
Gilliam said he expected the headline jobs number to be positive in the second half of the year, about 18 months after temp hiring bottomed, but it may not come until 2011.
"If you look at the GDP numbers or the productivity numbers, you could argue we're rocketing out of the recession. But the confidence around the recovery is not there yet."
Roy Krause, chief executive of SFN Group Inc., formerly Spherion Corp., said demand for temporary workers was broadening into areas like information technology, but not yet into fields like accounting and finance. He called Friday's data "positive."
"We should begin to see that as companies begin to expand and need more reports, more projects, open a plant, they bring in the accounting types."
March, April and May typically reflect a seasonal ramp-up in hiring of contract workers, so next month's government report should show gains of 100,000 or more temporary jobs.
"If we don't see ramping in March, then I would be a little more worried," he said. Employers in this recovery are more likely to take on prospective hires as temps first, to try them out, depending on the person's skill level.
Such a "try before you buy" approach is called liquidation in the staffing industry.
"People want this (recovery) to happen faster but we're still on the right path," said Scott Melland, whose Dice Holdings Inc. runs Web sites that specialize in finance and technology jobs.
On the Dice.com technology site, the number of jobs is up 23 percent from the bottom last June, while on eFinancialCareers.com the number of postings is up 20 percent from the lows.
"Financial services was definitely hit harder than technology, but it's hard to read too much into the differences," Melland said. "The recovery is happening. I expect it to continue to gradually improve."
Investors in staffing shares focused on growth prospects in early trading, sending shares up across the board.
Manpower gained 2.9 percent to $55.25, Robert Half International rose 3.9 percent to $29.90, TruBlue jumped 6 percent to $14.39 and SFN was up 2.9 percent to $8.21, all on the New York Stock Exchange.
Adecco, which this week reported better-than-expected results, gained 2.2 percent in Zurich trading.
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