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Temporary employment in the United States has fallen for the sixth month in a row, possibly signaling a recession


  Temporary employment in the United States has fallen for six straight months, according to new data that could signal a recession ahead.

  Historically, changes in temporary employment have tended to signal turning points in the labor market and the economy because temporary workers are the easiest to lay off when economic growth slows, meaning temporary workers are the first to fall.

  But executives disagree. Executives believe the decline in temporary hiring could represent a cooling of an overheated labor market and signal the possibility of a soft landing, rather than a full-blown downturn.

  Richard Wolquist, CEO of the American Temporary Labor Supply Association, said, "I see more optimism as the third quarter winds down. The decline in temporary employment does not mean we are on the brink of a recession. "When I talk to ceos of staffing firms in most industries, they are optimistic about the fourth quarter, and from what we've seen so far, it looks like the U.S. economy has made a soft landing."

  That could be good news for Fed Chairman Jerome Powell, who has focused on the labor market in an effort to control inflation without triggering a recession. Powell believes that if the Fed is to achieve its 2 percent price growth target, it needs to better align labor demand with supply.

  In other data, the Labor Department reported that job openings fell to 8.83 million in July (JOLTS), the lowest level in more than two years, but still well above pre-pandemic levels. Us companies added the fewest jobs in five months in August as a hiring boom in the leisure and hospitality sector faded, according to ADP data.

  The August non-farm payrolls report is due on Friday. Non-farm payrolls are expected to have slowed to 170,000 in August from 187,000 in July, according to the median forecast of economists, although the August figure may have been affected by the Hollywood actors' strike.

  Temporary worker data has been a leading indicator of the labor market...

  Historically, temp data have been a leading indicator of the direction of the labor market: they are the first jobs to be added when demand is rising, and they are the most vulnerable to layoffs when economic growth slows.

  On the face of it, this is worrying. Excluding the pandemic, temporary employment has fallen for six straight months this year, the longest stretch of decline since the 2007-09 financial crisis.

  "Our industry is clearly entering a recessionary environment," said Mark Plessin, CEO of Manpower Group, a global staffing agency. But the chances of the US avoiding outright contraction are roughly 50-50. Because hiring and wage growth have fallen more slowly than he expected, companies have had trouble hiring people in the wake of the pandemic, and they have tended to retain workers. As long as employers decide to keep their workers, we are likely to see a controlled decline and a soft landing."

  Kimbell, CEO of LaSalle Network, said: "The current labor market reminds him of 2017 and 2018, when the demand for workers was steady but not breaking records. I don't expect a full-blown recession."

  Some economists say the signals are not yet clear...

  Stacey McCoy, vice president of research and insights at staffing agency EmployBridge, said: "The reality is that a decline in temporary workers is not always a clear indicator of an impending recession. While the unemployment rate continues to fall, employment in this sector declined in 2019."

  She added: "The downturn in temporary employment could be a sign that workers are asking for full-time jobs rather than accepting less secure temporary jobs." While the U.S. has lost about 205,000 temporary jobs since peaking in March 2022, most of those appear to have moved into full-time employment. So rather than being a sign of trouble to come, the weakness in the temp data is perfectly consistent with tight labor market conditions."

  Richardson, chief economist at Automatic Data Processing, a payroll management firm, said: "After the wild swings during the pandemic, the Labour market is returning to some degree of normality. After two years of exceptional growth associated with the economic recovery, we are making progress toward more sustainable growth in pay and employment as the effects of the pandemic on the economy fade."

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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