GPalmer Q1 Forecast: Labor Forecast Predicts 8.5% Increase in Demand for Temporary Workers

–  Industry Consulting Firm G. Palmer & Associates’ Quarterly Forecast Assists in Previewing Near-Term Hiring Patterns -­Newport Beach, Calif. January 16, 2014 — Demand for temporary workers in the United States is expected to increase 8.5% on a seasonally adjusted basis for the 2014 first quarter, when compared with the same period in 2013, according to the Palmer Forecast™, released today.

The Palmer Forecast™ indicated an 8.2% increase in temporary help for the just-ended 2013 fourth quarter. Actual results came in better than anticipated, at a 9.1% increase. Results, in part, reflect stronger than anticipated GDP growth, coupled with uncertainty around the anticipated implementation of the Affordable Care Act. It’s important to remember that temp help created approximately 11.0% of new jobs reported since the recovery began, while representing only about 2.0% of the total labor market, reflecting in our view continued uncertainty in the future

GPalmer Forecast vs. Actual

Temporary Employees in Thousands

GPalmer Forecast vs. Actual Temporary Employees in Thousands

 

GPalmner 2nd Chart

 

The Palmer Forecast™ for the 2014 first quarter follows recent trends demonstrating growth and indicating another increase in demand for temporary workers, marking the sixteenth- consecutive quarter of year-over-year increases.

In 2013, the BLS reported an average of 20,600 temp jobs created per month and slightly more than 247,000 in total. The trends point to high single digit temp help growth for the early part of 2014 with year-over-year growth rates of 8.6% and 9.1% in November and October respectively. There were 174,000 temp jobs added in 2012 and 167,000 additional temp jobs added in 2011 over 2010, following an increase of 339,000 temp jobs in 2010 over 2009.

The Labor Department reported that a net of 74,000 non-farm jobs were added in December 2013, which was lower than expectations. Of the jobs created, 90,000 were service related and 2,000 were in manufacturing. The report also indicated some sectors shed jobs in this period, including 13,000 in government, 16,000 in construction and 3,000 in goods producing industries. For the most recent three-month period ended December, the moving average of non-farm jobs decreased to 172,000 versus 205,000 for the three-month period ended November.

“While these trends show improvement, it must be kept in perspective that between 2008 and 2009, 8.7 million jobs were shed from the economy and roughly 11 to 12 million people are still looking for work today. These latest statistics all point to a modestly improving labor market, but with an uneven distribution as it relates to new job growth,” said Greg Palmer, founder and managing director of G. Palmer & Associates, an Orange County, Calif-based human capital advisory firm. “The persistently high unemployment rates continue to have far-reaching effects across a broad spectrum of workers. Those at the lower end of the job market in terms of skills and education, along with workers in the government, are experiencing the greatest challenges. The unemployment rates have slowly trended down, but discouraged workers opting out of the ranks of seeking jobs continue to be the biggest reason for improvement as evidenced by the all time lows in the labor participation rate in December at 62.8%, the lowest since 1978.”

The commonly referred to unemployment rate, U3, dropped 30 basis points to 6.7% in December from 7.0% in November. As reported by the BLS, the rate of unemployment for workers with college degrees also was down 10 basis points to 3.3 % in December versus November. The unemployment rate for workers with less than a high school degree during the same period decreased to 9.8% in December from 10.6% in November. The U6 unemployment rate, which tracks those who are unemployed, as well as those who are underemployed and are working part-time for economic reasons, remained flat at 13.1%. The U6 rate is considered the rate that most broadly depicts those most affected by the downturn and measures the rate of discouraged workers.

The next few quarters…..

“We still expect unemployment rates to remain stubbornly high for the foreseeable future,” Palmer said. “One of the key aspects of the high rates continues to be the much talked about skills gap found in available workers, namely, the lack of required skills or education needed for today’s increasing technical and skills-based positions. The key skill areas most severely impacted are those in Health Care, Information Technology, Skilled Trades and those positions that require high degrees of math and science. The gaps in these areas are beginning to widen and could cause pressure on wages in the future, as evidence by a recent McKinsey survey, showing that 40% of companies are reporting that certain jobs are remaining open for six months or longer.

“One of the most revealing indictors to watch during this uneven recovery relative to Temp Help growth is the Temp Help penetration rate. The Temp Help penetration rate is significant because it measures Temp Help as a percentage of total employment. The penetration rate increased to 2.06% of the total labor market from a low of 1.34% in June 2009. The penetration rate reached an all time peak and surpassed the previous high of 2.03 % reached in May of 2000,” Palmer added.

GDP Vs. Temporary Labor Percent Change Year Over Year

GPalmer 3rd Chart

Source: Bureau of Labor Statistics

The Palmer Forecast™ is based, in part, on BLS and other key indicators.The model was initially developed by the A. Gary Anderson Center for Economic Research at Chapman University and serves as an indicator of economic activity. Companies that employ temporary staff use the forecast as a guide to navigate through fluctuating economic conditions in managing their workforce to meet business demands.

About G. Palmer & Associates

G. Palmer & Associates, founded in 2006, provides advisory services in the human capital sector with the purpose to increase shareholder value. Founder Greg Palmer has served on the board of the American Staffing Association and was president and chief executive officer of RemedyTemp, Inc., one of the nation’s largest temporary staffing companies, prior to its sale in June 2006. For more information, visit www.GPalmerandAssociates.com.