Companies that provide temporary labor are seeing more contract workers hired as permanent employees, in a sign job gains may be broadening as U.S. employers gain confidence in the recovery, staffing executives said Friday.
Companies typically engage temporary workers before committing to permanent hires, so the staffing sector is seen as a leading indicator of broader hiring.
The sector added 45,000 jobs in February, while temp job gains in January and December were stronger than initially estimated, the government report showed on Friday. The job gains were part of a broader jobs report that showed 227,000 jobs added outside the farm sector.
The percentage of temps in the U.S. labor force, at 1.86 percent, marked the eighth straight monthly increase. Employment analysts expect that metric to pass its April 2000 peak above 2 percent as more employers embrace temporary labor in an uncertain economic climate.
Companies are using temps to try out candidates for permanent jobs, said Jeff Joerres, Chief Executive of ManpowerGroup.
"Our temporary to permanent conversions are very high," Joerres said. Taking on temp workers "is also is a way of being agile and cautious, so if something happens in the Middle East and demand goes down precipitously, (they) have a way to adjust without affecting the permanent workforce."
'ROBUST' DEMAND BUT FLAT WAGES
Small and mid-size companies are stepping up use of temporary workers as easier access to credit allows them to invest, said Randstad employment analyst Joanie Ruge, who said pharmaceutical companies are using more temps for research and other roles.
"It is robust," Ruge said. "Companies are going to look for more flexibility in their workforce. They will expand and contract as their demand fluctuates."
While demand for temps is strong, it is not necessarily accelerating, said Joel Capperella, vice president of Yoh, a Philadelphia-area staffing company that focuses of professional job categories such as technology. Wages are flat. A Yoh index of wages for skilled temporary workers found only a 1 percent gain over a year ago.
"Wages aren't really moving a whole lot," Capperella said. "Clients of our services are in the driver's seat. Things are good but you have to temper it."
Staffing stocks were higher across the board in U.S. and European trading and far outperformed the broader market on expectations that growth rates would pick up for the sector in coming months.
Manpower shares gained 2.3 percent in midday trading. Robert Half International rose 1.6 percent, Hudson Highland jumped 7 percent and TrueBlue Inc, which focuses on blue-collar jobs, was up 2.4 percent.
In European trading, Adecco, Randstad and Michael Page each gained more than 2 percent.