Labor Forecast Predicts 8.6% Decrease in Demand for Temporary Workers for 2021 First Quarter
— Industry Consulting Firm G. Palmer & Associates’ Quarterly Forecast Assists in Previewing Near-Term Hiring Patterns —
Reported provided by G. Palmer & Associates
Newport Beach, California, January 14, 2021,
— Demand for temporary workers in the United States is expected to decrease 8.6% on a seasonally adjusted basis for the 2021 first quarter, when compared with the same period in 2020, according to the Palmer Forecast™, released today.
The Palmer Forecast™ indicated a 15.1% decrease in temporary help for the 2020 fourth quarter. Actual results as reported by the Bureau of Labor Statistics (BLS) came in significantly better, with a decline of only 9.5%, largely reflecting lower unemployment rates and faster jobs growth in the professional and business services, retail, construction and manufacturing sectors. Temp help increased by 67,100 jobs in December vs. November, but it was still down 7.6% from a year earlier.
Source: G. Palmer & Associates; Bureau of Labor Statistics (BLS)
Source: Bureau of Labor Statistics (BLS)
According to the BLS, 279,000 temp jobs were lost in 2020, the second straight year of declines, an average job loss of 23,250 per month. The BLS also reported that 42,000 temp help jobs were lost in 2019, an average of 3,500 fewer jobs per month. In 2018, more than 99,000 temp help jobs were added vs. 2017, an average of 8,200 per month. Additionally, 96,000 temp jobs were added in 2017 over 2016, an average of 8,000 per month, compared with 32,000 temp jobs added in 2016, or an average of 2,600 per month. In 2015, approximately 97,000 temporary jobs were added, compared with 162,000 new temp jobs in 2014, 139,000 in 2013 and 142,000 in 2012.
The Labor Department reported that total nonfarm payroll employment declined by 140,000 in December 2020 vs. a consensus estimate decrease of 100,000 jobs. For the fourth quarter 2020, the nonfarm jobs average decreased to 283,000, compared with 567,000 in November. For 2020, nonfarm employment was down 6.17%, or 9,372,000 jobs, compared with 2019. To put this in perspective, there were 176,000 jobs added on average per month in 2019 and 2.1 million total jobs added for the year, which was less than the 220,000 added per month in 2018, and 2.6 million total for that year. For 2017, a total of 2.1 million new jobs were created, versus 2.2 million new jobs in 2016.
The key categories of jobs created are as follows:
- Total Non-farm jobs: -140,000
- Hospitality and leisure: -498,000
- Retail: +121,000
- Education and Health Services: +39,000
- Professional and business services: +161,000
- Manufacturing: +38,000
- Construction: +51,000
- Temp Help: +67,100
- Government sector: -45,000
Source: Bureau of Labor Statistics (BLS)
In December 2020, the labor participation rate was 61.5%, unchanged from November. The U3, commonly referred to as the unemployment rate, also remained the same at 6.7% for both December and November 2020.
As reported by the BLS, the rate of unemployment for workers with college degrees ticked down 40 bps in December vs. November, to 3.8%, and the unemployment rate for workers with less than a high school education increased 60 bps to 9.8%. 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, was down 30 bps to 11.7% in December vs. November. The U6 rate is considered the rate that most broadly depicts those most affected by the last economic downturn and measures the rate of discouraged workers.
“One of the most revealing indicators to watch is the temp help penetration rate, because it measures temp help as a percentage of total employment. In December 2020, the temp penetration rate increased by 20 bps from November to 1.91% of the total labor market, versus a low of 1.3% in June 2009, and this cycle’s peak at 2.05% in December 2019,” said Greg Palmer, founder and managing director of G. Palmer & Associates, an Orange County, California-based human capital advisory firm that specializes in workforce solutions.
Source: Bureau of Labor Statistics (BLS)
The next few quarters
“The temp help employment market improved significantly in December, as compared with the more modest gains realized during the summer,” Palmer added. “The uncertainty of both the second round of stimulus dollars for unemployment benefits, as well as additional bail-out for businesses impacted by COVID-19 make the flexibility to hire temp help more attractive during uncertain times. The American Staffing Association Staffing Index is rebounding from an index low of 59.9 on May 10, 2020 to a strong close of 88.9 on December 27, 2020, but representing a 2.5% decline vs. the same period in 2019. This provides further signs of recovery in temp help as we move into the new year.”
About the Palmer Forecast™
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
Palmer & Associates, founded in 2006, provides advisory services in the human capital sector. FounderGreg 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.
