Nervous Companies Hire Temps Instead of Full-Timers

Good news! Employees are earning more as companies see more demand for their services.

The bad news is that with a still shaky economy and fears about Europe’s economy, companies are too nervous to hire full-time workers.

So they’re turning to temp workers.

This is the basic takeaway from June’s jobs numbers released by the Department of Labor.

  • The jobless rate stayed the same at 8.2%.
  • Full-time jobs increased by only 80,000, which was less than economists had hoped–and lower than this time last year–because companies are relying on temp workers and longer work hours.
  • Temporary staffing continued its three-month growth, with 25,200 temps hired in June.
  • The average workweek rose for the first time since February by six minutes, to 34.5 hours.
  • The good news to come out of this is that workers’ average hourly earnings rose $.06 to $23.50 in June, which is ahead of inflation. Whether this is because they are getting raises or getting more overtime is unclear.

The thing is, if companies had decided to hire more full-time workers instead of relying on existing workers to work longer, they would have hired 325,000 new full-time employees, according to estimates by economists at Nomura Securities International Inc.

Traditionally, the hiring of more temp workers indicates a future bump in the hiring of full-time workers, as those temp workers are converted to full-time staff. But this time is different. Companies have been burned several times by the stuttering economy, so they’re loath to commit to a full-time worker. The CEO of Manpower, a temp staffing firm, says only 30% of temporary employees the firm has placed this year have been hired full time. Last year 45% were.

Companies are also looking for specific skills for short-term projects. And of course, temp workers don’t require companies to pay benefits. With the new health care law (see our breakdown of what it means for you), small businesses are waiting to see how it will affect what they pay for health insurance.