Overall Job Creation Slows in June

Companies Increasingly Relying on Temp Agency Workers as Economy Has Added Jobs

For immediate release: July 2, 2004
Contact: Andrew Stettner, 212-285-3025 x 110

Today’s labor department report showed noticeable slowing in hiring, with important consequences for those Americans most needing work.  In June, the nation’s payrolls grew by only 112,000, much less than predicted by economists and the weakest month of job creation since February.  Workers’ hours dipped to 33.6 per week, the lowest reading since December and a sign that many firms still have excess capacity. 
 
The nation’s long-term unemployed, in particular, are counting on better job creation numbers.  In June, 21.6% of all the unemployed were out of work for more than six months,  the 21st consecutive month when this indicator has been over the 20% high-water mark. This surpasses the longest streak on record, 18 weeks during the early 1980s.  Even though job cuts have slowed, these long-suffering workers still have not been picked up by the economy and have been denied federal extended jobless benefits by Congress since last December.
 
The economy has grown by 1.5 million jobs since entering into positive territory in August, 2003.  This job growth has failed to replace all of the jobs lost since before the recession began in March 2001. One indicator of the lack of quality jobs being produced is the disproportionate share of temporary jobs during this uptick in job creation. Since August 2003, employment in temporary agencies has increased by 203,000 jobs.  While overall jobs have increased by 1.2% since August, temp employment has increased by 9.0%.
 
Some might view this growth in temporary jobs as an indication of more permanent job creation to come. While many of these temp workers would hope to be converted into permanent positions, there is growing evidence that employers will continue to use temporary help to keep down labor costs.  During the boom of the late 1990s, the share of private sector workers working in such jobs doubled from 1.2% in 1991 to 2.4% in 2000. As companies laid off some of their extra temp staff, such employment dropped to 1.96% by February 2002, but temps' share of overall employment remained steady as the rest of the economy lost jobs until August 2003. It has returned to 2.25% by June 2004, increasing quickly over the past 12 months.  Such a trend (illustrated in the graph below) indicates that temp employment will become a more profound part of the economy during the coming economic cycle.
 
While helping companies maintain labor flexibility, temporary help jobs deprive workers of job security and in most cases employment benefits like health insurance and paid leave.  Moreover, the statistics above only account for those hired through temp agencies – not all of the workers hired as independent contractors, working part-time or as regular wage-and-salary employees on a temporary basis.  

Shaded areas represent official recessions.