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In the two years after the Great Recession ended in June 2009,1

U.S. staffing firms created more new jobs than any other industry.

According to the U.S. Bureau of Labor Statistics, the temporary

help services industry added nearly half a million workers and

accounted for 91% of total nonfarm job growth from June 2009

through June 2011.2

Even as the American staffing industry

leads overall job growth, it still has far to

go in returning to its prerecession high.

The industry lost more than a third of

its work force during the recession, and

only about half of those losses have been

recovered in the subsequent two years of

economic expansion.3, 4

The staffing and recruiting industry

is "hypercyclical," meaning its business

cycle tends to be exaggerated during

economic expansions and contractions.

Staffing industry employment usually

peaks in the fourth quarter of any given

year. In the fourth quarter of 2008,

however, when the U.S. economy was in

the midst of a free fall, staffing employment

contracted by a quarter million

workers-the most severe decline in

the recorded history of the industry.

When business is going badly, staffing

clients quickly respond by first shedding

temporary and contract workers.

In January 2009, the White House

estimated that payroll employment in

temporary help services accounted for

one in five job losses in 2008.5

In contrast, in the early stages of

economic recovery, businesses turn first

to temporary and contract workers to

help them meet growing demand. Hence

the rapid uptick in staffing employment

since the Great Recession ended.

This cycle can be observed in decades

of government data (see Figure 1). It

reveals that staffing employment is

a coincident economic indicator and a

leading employment indicator, particularly

when the economy is emerging

from a recession.

Staffing as an Economic Indicator

Staffing jobs have historically been

uniquely sensitive to the ebbs and flows of

the economy. As the economy contracts,

the number of staffing jobs declines.

As the economy expands, staffing jobs

increase. This is especially true when

the economy pulls out of a recession,

according to research results published

by the American Staffing Association

in June 2009, just as the Great Recession

was ending. "A sustained upturn in

temporary and contract staffing employment

would signal the end of the current

recession," the ASA research paper

predicted.6

That prediction was based on an examination

of employment and economic

data from 1972 through 2008. Analysis

confirmed that temporary help employment

is a coincident economic indicator.

However, that relationship has weakened

over time; it was stronger in the 1970s

and '80s than it has been in the past

two decades. Further analysis, looking

at the phases of economic cycles rather

than merely the passage of time, uncovered

an important nuance: Temporary help employment is a particularly strong

coincident economic indicator when the

economy is emerging from a recession.

Just a week after the association's

results were published, the ASA Staffing

Index troughed. The index showed that

staffing employment reached its lowest

point the week of June 29 through

July 5, 2009 (see Figure 2). Thereafter,

sustained growth in staffing employment

ensued. The recession had ended

(as confirmed 15 months later by the

business cycle dating committee of the

National Bureau of Economic Research,

the nongovernmental body that decides

when recessions begin and end).

The ASA Staffing Index provides a

near real-time gauge of staffing industry

employment and overall economic

activity. It tracks weekly changes in

temporary and contract employment,

with results reported nine days after the

close of a work week (see the sidebar

"Methodology of ASA Economic

Surveys," on page 46).

The weekly percentage change in

employment is applied to an index that

was set at 100 when publicly launched

June 12, 2006, after several years of

development. The baseline of 100 helps

to easily estimate how much staffing

employment has changed over time. For

example, when the index troughed at 66

in midsummer 2009, staffing employment

had fallen about 34% from its level in

mid-June 2006. The index peaked at 105

in mid-October 2007, coinciding with the

peak of the previous economic expansion.

Staffing as an Employment Indicator

ASA analysis of government data

shows that temporary help employment

is a strong coincident economic indicator

when the economy is emerging from a

recession. Additionally, staffing jobs are

a leading employment indicator. Changes

in staffing job numbers usually precede

changes in overall nonfarm employment

(excluding temporary help) by one to

two quarters. Based on the 1972 through

2008 data, the relationship was strongest

with staffing jobs leading nonfarm

employment by two quarters during

periods of normal economic growth.

When the economy was emerging from

a recession, staffing jobs were a modest

one-quarter leading indicator of overall

job growth. All things considered,

staffing employment has historically

been a solid leading indicator of nonfarm

employment by three to six months.

What's happened since the end of the

Great Recession?

Using BLS seasonally adjusted data

(which had been used in the analysis),

staffing job growth was first detected in

September 2009.7 Nonfarm employment

began an upward trend six months later,

in March 2010.8 The ASA Staffing Index is not

seasonally adjusted. Sustained staffing

job growth started the week of July 6,

2009. Nonseasonally adjusted BLS

data show sustained staffing job growth

began in August,9 just a few weeks later,

and nonfarm employment beginning an

upward trajectory in February 2010, six

months later.10

The difference between staffing job

growth starting in August or September

and nonfarm job growth starting in

February or March is a matter of

seasonal adjustment. The ASA Staffing

Index more closely matches the cycle

tracked by NBER.

Although staffing and total nonfarm

employment have improved in the two

years since the recession ended, new

hiring has come to virtual standstill

in recent months. What does this-

particularly the flattening in staffing job

growth-portend for future employment

trends?

Probably continued weakness in the

job market. In terms of employment,

the Great Recession was by far the worst

recession since the government started

keeping records shortly after World War

II (see Figure 3); some say the worst

since the Great Depression.11

The Economy and Jobs

In the two years following the end

of the Great Recession, the U.S.

economy has experienced its most sluggish

recovery since World War II (see

Figure 4).

"It is the worst, no question about it,"

said Northwestern University economist

Robert Gordon.12

He's "absolutely right," said Stanford

University economist Robert Hall, who

heads NBER's business cycle dating committee

(which Gordon serves on, too).13

Beginning with the first quarter

of 2008, real gross domestic product

(GDP) declined in five of the subsequent

six quarters to mid-2009. At

that point, the cumulative decline was a stunning 5.1%, far exceeding the depth

of the 1957 recession (-3.7%), which up

until then had been the worst one since

World War II-but from beginning to

end, that recession lasted less than a

year, and the U.S. economy fully recovered

in two quarters.14

Even a year after resuming growth

in the third quarter of 2009, GDP

remained 2.0% below its prerecession

peak. After expanding robustly in the

fourth quarter of 2009 and the first

half of 2010, GDP growth weakened

substantially, especially in early 2011

(see Figure 5). After two full years of

growth, GDP has yet to fully recover to

its prerecession level. It remains cumulatively

down 0.4%.15

U.S. employment remains in the

doldrums, too.

More jobs were lost in the 2007-09

recession than had been created in all of

the previous expansion. Nonfarm employment

peaked in December 2007 at

138 million jobs. After two-plus years

of mammoth job cuts, nonfarm employment

bottomed at 129 million in

February 2010. More than 8.7 million

Americans lost their jobs, compared

with some 8.2 million jobs created after

the 2001 recession.16

As of mid-2011, 14.1 million Americans

are unemployed, according to

BLS-44.4% of whom have been

jobless for 27 weeks or longer.17

Job losses, of course, increase the

unemployment rate. It more than

doubled from 4.4% in 2007 to as high

as 10.1% in October 2009-an increase

of 5.7 points. The unemployment rate

peaked higher at 10.8% during the

1981-82 recession, but that recession

started with a much higher trough: 7.2%.

So the unemployment rate during that

recession increased by 3.6 points. In

terms of the unemployment rate increase,

the 2007-09 recession was about 60%

worse than the 1981-82 one.

BLS defines "unemployed" individuals

as "all persons who are without jobs

and are actively seeking and available to

work."18

Add the underemployed-those

marginally attached to the work force or

working part time because they cannot

find full-time jobs-and the scope is

staggering. BLS estimates that the

number of unemployed and underemployed

now totals more than 25 million

Americans.

Plus, a million discouraged workers

have stopped looking for jobs.

The U.S. population has continued to

grow, yet its labor force has shrunk. The

employment-to-population ratio is the

lowest it's been in 28 years-only 58.2%

of the U.S. population 16 years old and

older is working. Before the recession, it

was as high as 63.4%.19

GDP has nearly recovered, but

employment has not. Only 1.8 million

jobs have been created since nonfarm

employment began growing again in

March 2010.20 In mid-2011, the unemployment

rate remained above 9%.21

At the rate of job creation in the first

half of 2011, it would take another four

and a half years for nonfarm employment

to reach its prerecession level22

(see Figure 6).

The Wall Street Journal estimates

that-at the current pace of job growth

and labor force expansion-the unemployment

rate would still be near 9%

in June 2012, three years into the

economic recovery. The Journal further

calculates that the U.S. unemployment

rate would not decline to 5% until

December 2024.23 (BLS considers the

economy at full employment when the

unemployment rate is 5.1%.24)

Economists surveyed by the Journal in

July project that GDP growth will pick

up in the second half of 2011, averaging

just over 3% through 2012. Accordingly,

they predict the unemployment rate will ease to 8.4% by June and 8.1%

by December 2012.25

Two-thirds of the 53 surveyed economists

blamed weak hiring on lack of

demand.

An economist at the Federal Reserve

Bank of New York, Jonathan McCarthy,

uncovered a pronounced weakness in

personal discretionary consumption expenditures

for services, such as recreation,

transportation, food services (including

restaurants), and household utilities. These

discretionary expenditures account for

about 30% of total personal consumption,

which altogether make up about 70% of

GDP. McCarthy found that discretionary

services expenditures have fallen nearly

8.5%, more than three times as much as

the previous three recessions, and they have

yet to rebound (see Figure 7).26

In short, reduced consumer spending

on discretionary services tells much

of the story of the recession-and of

the overall sluggish recovery, he said.

Households wary about their employment

will be cautious about increasing

their discretionary spending.

The Staffing Recovery

U.S. temporary and contract staffing

employment has been growing steadily

since the end of the Great Recession,

according to the ASA Staffing Index27

(see Figure 2 and sidebar "Methodology

of ASA Economic Surveys" on page 46).

Introduced at 100 in June 2006, the

index peaked at 105 several weeks in

the fourth quarter of 2007, coinciding

with the prerecession peak in nonfarm

employment. Then the index took its

usual seasonal fall around Christmas

2007 and New Year's Day 2008,

rebounding in January 2008 to 95. It

remained near that level for the first half

of the year, not showing the usual rise

as the year proceeded. (Staffing employment

is typically lowest at the beginning

of the year, increases during the year, and peaks late in the year-the industry's

normal cycle when the economy

is growing. See 2007 in Figure 3 and

quarterly trends in Figure 8.) In retrospect,

the flatness of the index in the

first half of 2008 was indicative of a

weakening economy.

The index shows that staffing employment

began to decline in the third quarter

of 2008. After Lehman Brothers Holdings

filed for bankruptcy in September,

the index dropped rapidly.

The week of Dec. 15 was telling: In

what would normally have been one

of the busiest weeks of the year for the

staffing industry, temporary and contract

employment dropped 4.6%, knocking

three points off the index. By the end of

the year, the index had plunged to 69-

at the time its lowest value ever and 26

points lower than in June-equating to a

27% loss of jobs in just six months, most

of which occurred in the last six weeks of

the year.

The index shows that staffing employment

remained virtually unchanged for

the first half of 2009. But then, after

bottoming out at 66 the week of Independence

Day, it began to tick up, and

up and up, week after week, reaching 82

by mid-December. The index shows that staffing employment

remained virtually unchanged for

the first half of 2009. But then, after

bottoming out at 66 the week of Independence

Day, it began to tick up, and

up and up, week after week, reaching 82

by mid-December.

Then, after the usual pause due

to Christmas and New Year's Day,

growth resumed again in 2010, with

the index rising to 94 in November and

December.

After another holiday pause, growth

continued in the first half of 2011, too,

albeit more slowly. As of mid-July, the

index had reached a high of 88, three

points (3.6%) higher than in the same

week of 2010.

Average Daily Employment

Average daily employment of temporary

and contract workers fell from

3.12 million in 2007 to 2.18 million

in 2009, a loss of nearly a million jobs,

or 30% of the industry's work force

(see Figure 8),28 according to the ASA quarterly employment and sales survey.

(See the sidebar "Methodology of ASA

Economic Surveys" on page 46.)

In 2010, the industry regained

401,000 jobs, bringing average daily

employment to 2.58 million-a year-toyear

increase of 18.4%. In terms of job

gains, 2010 ranked second behind the

historical record of 428,000 set in 1994.

The 2010 rate of growth ranked third

behind 1993 and 1994 (just over 25%

each) in the 20-year history of the ASA

survey. (BLS reported a 32% growth

rate in 1984.29 See Figure 1.)

From the end of the Great Recession

through 2010, U.S. staffing firms added

more than 766,000 jobs-from a low

of 2.05 million in the second quarter

of 2009 to 2.81 million in the fourth

quarter of 2010.

Since the second quarter of 2010,

when the industry reported 24.2%

more jobs than in the same period of

2009, staffing employment has been

growing at double-digit rates, though

the rate has been slowing. In the first

quarter of 2011, the staffing industry

employed 2.62 million temporary and

contract workers, 14.3% more than in

the first quarter of 2010. (As previously

noted, staffing employment is normally

lowest in the early part of year, rising

as the months go by, and peaking in

November or December; see Figure 8.)

As a percentage of the total nonfarm

work force (the penetration rate),

staffing dropped from 2.3% in 2007

to 1.7% in 2009. In 2010, the staffing

industry's proportion of nonfarm

employment rebounded to 2.0% (see

Figure 9).30

Other Employment Measures

Average daily employment is really

a count of the number of individuals

working on assignments on a typical

business day. For most industries, the

daily average roughly equals annual

employment. Given the generally

short-term nature of temporary and contract work, however, there are

millions more employees who work in

the staffing industry over the course

of a year than are accounted for in the

daily average.

To determine annual employment in

the staffing industry, ASA collects data

on the number of Form W-2s issued

annually to temporary and contract

employees by the staffing firms that participate in the association's quarterly

employment and sales survey. From

that data, ASA estimates the number of

temporary employees who have worked

in the staffing industry during the

calendar year.

In 2010, U.S. staffing firms hired

9.7 million temporary and contract

employees over the course of the year, a

modest 3.2% rise from the 9.4 million

low of 2009, but still far below the

annual average of 13.1 million since

2000 (see Figure 10).

In normal years, more than 4.5 million

of those 9.7 million temporary and

contract employees would have bridged

to permanent jobs, about half with a

staffing client. But 2010 was not a normal

year-business hiring was weak.

Nonetheless, ASA research shows that

when the economy is growing normally,

53% of staffing employees who remain

in the work force bridge to permanent

employment.31

Although the staffing industry

employs only two of every 100

nonfarm workers on any given day, it

has provided income for millions of

American families-about one of every

13 nonfarm workers held a job with a

staffing company at some point in 2010.

A key reason that annual staffing

employment grew considerably slower

than average daily employment (4.1%

versus 18.4%) is because turnover

declined sharply and tenure increased

markedly (see Figure 11).

Turnover is the rate at which

incoming employees replace outgoing

employees over the course of a year. It's

calculated using average daily employment

and the number of annually issued

Form W-2s. Turnover is considerably

higher in the staffing industry because

most staffing employees work for their

staffing firms for relatively short periods.

In 2010, turnover dropped to 277%

from 328% in 2009.

Tenure-the duration of employment

with the staffing firm-is based on turn-over. Until 2010, it had increased slowly

in the previous 10 years, generally

adding a day or two per year, but overall

averaging 11.2 weeks, or less than three

months. In 2010, staffing employees

worked for their firms longer than ever.

Tenure increased by 1.7 weeks, from

12.1 in 2009 to 13.8 in 2010.

As it did for virtually all industries,

the Great Recession had a significant

effect on corporate employment among

staffing and recruiting firms. With

reduced demand for temporary and

contract employees and for recruiting

and placement services, staffing firms

trimmed their corporate work forces

(such as recruiters, customer service

representatives, and payroll clerks) and

closed offices during the recession. And

staffing firms-like businesses across

the economy-were slow to add new

permanent employees after the recession

ended.32

BLS does not distinguish between

the temporary and contract employees

and the corporate employees of "temporary

help services" firms in its monthly

surveys, and ASA measures only

temporary and contract employees in its

quarterly staffing employment and sales

survey, so there is no good measure of

overall corporate employment among

such firms.

BLS does, however, measure corporate

employment among establishments

that provide principally search

and placement services. Jobs among

"executive search services" and "employment

placement agencies" together

declined by 28.3% from 310,400 when

the recession started to 222,700 when it

ended. Search and placement employment

hovered around 225,000 for the

next nine months, then started to grow

again in April 2010. Annual average

employment in 2010 totaled 235,500,

up 3.6% from its 2009 low of 227,300

(see Figure 12). Search and placement

employment has continued to tick up,

increasing to more than 250,000 as of

mid-2011. (Note: BLS does not seasonally

adjust this industry sector.)33

Staffing Sales

After peaking at $98.3 billion in

2007, temporary and contract staffing

sales slid 3.8% in 2008 and plummeted

24.1% in 2009 to $72.0 billion-a total

decline of $26.3 billion (see Figure

13).34 The staffing industry's sales losses

in 2009 were the biggest ever, even

though temporary and contract employment

in some sectors began to grow

again in the middle of that year.

In 2010, sales increased 21.3% to

$87.4 billion.

After seven consecutive quarters of

year-to-year declining sales-from the

second quarter of 2008 through the

fourth quarter of 2009-growth resumed

in the first quarter of 2010 at 8.5%.

Year-to-year sales jumped 25.2% in the

second quarter of 2010 and pushed up

to a 28.2% increase in the third quarter,

making it the strongest ever quarterly

sales performance in the history of the

ASA employment and sales survey,

which has been tracking sales quarterly

since 1992.

Sales growth eased a bit in the fourth

quarter (up 23.2%) and eased further

in the first quarter of 2011 (up 19.5%).

Temporary and contract staffing sales

would have to grow at least 10.5% in the

second through the fourth quarters of

2011 for the annual total to match the

$98 billion peak of 2007.

With the exception of outplacement

(a countercyclical sector in the staffing

industry) and health care staffing, all

industry sectors grew in 2010, according

to Staffing Industry Analysts Inc.35

Among temporary and contract staffing

services, industrial staffing showed the

strongest growth (27%), followed by

information technology, engineering,

and design.

Search and placement sales peaked

at $18.0 billion in 2007, according to

the U.S. Economic census conducted

by the U.S. Department of Commerce.

Sales declined 12% in 2008 and then

were devastated by a 51% falloff in 2009,

SIA estimates. Sales turned upward by

22.8% in 2010, according to SIA. Applying SIA growth estimates to the census

benchmark reveals that search and placement

sales totaled $9.7 billion in 2010

(see Figure 14).

Combining temporary and contract

services with search and placement

services, U.S. staffing industry sales

totaled $97.1 billion in 2010, 21.5%

more than in the previous year. Search

and placement sales accounted for

10.0% of total staffing and recruiting

industry sales in 2010, down significantly

from 15.5% in the peak year of

2007 (see Figure 15).

The Flexibility Factor

Despite the Great Recession, the

U.S. staffing industry historically has

grown faster than the overall economy.

Over the past 20 years, GDP has

averaged 2.5% growth annually.36

In contrast, temporary and contract

staffing employment has averaged 4.8%

growth per year, and sales have averaged

8.1% annual increases.37

Why? It's because of the flexibility

factor: employees want it, businesses

need it, and it's good for the economy.

Employees Want Flexibility

America's work force has been

changing. Workers are increasingly

looking for flexibility in their employment

arrangements. In a landmark ASA

survey of more than 13,000 staffing

employees,38 two-thirds said flexible

work time was an important factor in

their decision to become a temporary or

contract employee; nearly one-quarter

of survey participants said it was an

extremely important factor. More than

half said needing time for family was

important; one in five said that it was

extremely important.

One in four had little or no interest

in a permanent job. They worked with

staffing firms for lifestyle reasons.

That survey was conducted near the

peak of the last economic expansion

and may not be fully reflective of the sentiments of workers in today's jobs

recession, but attitudes are changing

nonetheless. "In today's global economy,

employees and their employers need

to think about their working lives in a

whole new way," said Bruce Tulgan,

founder of Rainmaker Thinking and

one of the world's top management authorities.39 "Everything is turned

on its head. [Job] security is not about

stability; it's about mobility."40

A skills and talent council of the

World Economic Forum concurs:

"Global mobility of talent is becoming

as critical as the global mobility of

goods and services."41

The flexibility offered by staffing

firms helps explain in part why staffing

employees are much more satisfied with

their work arrangements than employees

in traditional arrangements-at least

during periods of economic growth.

In the ASA survey, 90% of respondents

said they were satisfied with their

staffing firm and various specific aspects

of their jobs, and 88% said they would

refer a friend or relative to work as a

temporary or contract employee.

In contrast, work force surveys

conducted around the same time as the

ASA survey showed that less than twothirds

of employees overall were satisfied.

In a CareerBuilder survey of 2,050

workers, 62% were satisfied with their

jobs.42 In a survey of 2,600 U.S. working

adults conducted by Mercer Human

Resource Consulting, only 58% said

they would recommend their employer

to others as a good place to work.43 In

another Mercer survey of 1,040 workers,

17% expressed dissatisfaction with

their employer's organization overall.44

In contrast, the ASA survey showed

that only 10% of respondents said they

were dissatisfied with their staffing firm

employer (see Figure 16).

While flexibility is important to staffing

employees, they are as likely to work

full time (which BLS defines as working

35 or more hours per week) as regular

employees.45 In the ASA survey, eight

in 10 worked full time, practically the

same as workers in traditional employment

arrangements (see Figure 17).

With the experience of matching

millions of people to millions of jobs

every day, staffing companies are experts

at finding work assignments in virtually all occupations, from day laborer to chief

executive officer (see Figure 18). Assignments

have been shifting toward occupations

that require higher levels of skills

and education.46



Businesses Need Flexibility

Flexibility and access to talent drive

business demand for staffing services.

In an American Management Association

survey of human resource managers at 1,248 firms, 91% said "flexibility

in staffing issues" was important,

and 95% said that flexibility was being

achieved through the engagement of

temporary and contract employees from

staffing companies. "Finding specialized

talent" also was important. Saving

on payroll and benefits costs was a low

priority.47

In an ASA poll of 500 businesses that

use staffing services, nine out of 10 said

it was important to them that "staffing

companies offer flexibility to businesses

so that they can keep fully staffed

during busy times." When survey

participants were asked specifically why

they use staffing firms to obtain temporary

and contract employees, they cited

three main reasons (see Figure 19)48

• To fill in for absent employees or to fill a vacancy temporarily

• To provide extra support during busy times or seasons

• To staff special short-term projects

Besides flexibility, the ASA poll

shows that businesses also look to

staffing firms as a good source of talent

for permanent employees. Regardless

of whether they need the talent on

a temporary, contract, or permanent

basis, businesses tap staffing companies

for quality talent in virtually all occupational

sectors (see Figure 20).

"Use of temporary or contract

employees to smooth out labor needs

has grown substantially," said Erica L.

Groshen and Simon Potter, economists

with the Federal Reserve Bank

of New York. "Uncertainty and financial headwinds likely constrain new job

creation." After outlining the considerable

obstacles employers must overcome

to create new jobs, they argued that

structural changes may be occurring in

the economy because of management

innovations that result in leaner staffing.

"Firms increasingly hire temporary help

when they are busiest and then cut back

when demand falls."49

Companies that embrace work force

flexibility and engage staffing firm talent

do better economically. "Increased reliance

on contingent (i.e., temporary and

part-time) labor...is associated with

superior subsequent performance...

[and] no increase in systematic risk,"

concluded a study published in Decision

Sciences journal. Economists Nandkumar

Nayar of Lehigh University and G. Lee

Willinger of the University of Oklahoma

compared firms in a carefully constructed

sample and found that earnings (before

interest, taxes, depreciation, and amortization),

gross margins, and stock returns

improved after the increased use of this

labor practice.50

The larger the company, the more

likely it is to use staffing services,

according to various surveys. In the

ASA poll of staffing clients, 12% of

companies with 25 to 99 employees said

they used staffing services, compared

with 24% of companies with 100 or more employees (see Figure 21). A

survey of Conference Board members-

mostly global companies-found that

90% use staffing services.51 And a

survey of large employers in San Diego

found that 95% use staffing services.52

Business use of staffing services is likely

to rise. In a 2011 McKinsey Global

Institute U.S. Jobs Survey of 2,000 employers

of all sizes and in all sectors, 34%

said they expect their companies will use

more temporary and contract workers

over the next five years. "Many employers

say they will...employ contingent

workers for flexibility and to better use

their permanent work forces," according

to the report (see Figure 22).53

Flexibility Is Good for the Economy

Besides workers wanting flexibility

and businesses needing it, it's also good

for the economy.

When Alan Greenspan was chairman

of the Federal Reserve Board, he spoke

frequently about the importance of

labor market flexibility to the U.S.

economy, even emphasizing it in his last

Monetary Policy Report to Congress in

July 2005: "That flexibility is, in large

measure, a testament to the industry

and resourcefulness of our workers and

businesses."54

Even Greenspan detractors cite the

value of flexibility. In a Wall Street

Journal op-ed critical of the Greenspan

Fed, Andy Laperriere, managing

director of the Washington office of

Wall Street firm ISI Group, wrote, "A

flexible labor force is one of the great

strengths of the U.S. economy."55

Labor market flexibility helps create

jobs. A study published by the Employment

Policies Institute determined that

"the temporary help industry helped to

increase employment in manufacturing

by allowing firms to expand their labor

forces in the face of uncertain demand

conditions." While BLS reported an

increase of 570,000 manufacturing

jobs from 1992 to 1997, EPI estimated that manufacturing employment actually

increased by 1,075,000. Temporary

help workers accounted for the difference-

about half a million jobs. In the

absence of a flexible staffing alternative,

the study concluded, manufacturers

would not have hired aggressively in

response to rapid increases in demand.56 The administrations of both presidents

Bill Clinton57 and George W.

Bush58 cited the staffing industry as

an important contributing factor in

creating jobs and reducing unemployment

in the past two decades.

Economists Lawrence Katz of Harvard

University and Alan Krueger of Princeton

University studied the dramatic drop in

the unemployment rate in the 1990s. They

concluded that the growth of the staffing

industry had the greatest impact-up to

40%-in reducing the unemployment

rate. They argued that staffing firms, as

labor market intermediaries, improve the

efficiency of matching workers to jobs.59

On a smaller scale, staffing firms

provide immediate employment-and

(taxable) real income-for workers and,

for those seeking permanent jobs, a

bridge to that end. In the ASA survey

of more than 13,000 staffing employees,

six in 10 respondents said they took a

temporary or contract job as a way to get

a permanent job. And a majority said

temporary or contract work made them

more employable because they could

develop new or improve existing work

skills, gain on-the-job experience, and

strengthen their résumés.60

The expanded use of temporary and

contract workers may also have enhanced

U.S. productivity, according to Chris

Varvares, a Macroeconomic Advisers

economist, by making it easier for businesses

to adjust their work forces as the

economy changes. U.S. productivity

trends have changed dramatically in the

past decade. A productivity boom in the

late 1990s has proven to be unexpectedly

enduring. On a year-to-year basis,

productivity has not declined since 1995.

In the 1970s and 1980s, it contracted for

long periods around recessions.61

Jobs, flexibility, bridge to permanent

employment, choice of alternative employment arrangements, and

training-these are the benefits staffing

firms offer to today's workers. Flexibility

and access to talent-these are the

benefits staffing firms bring to business

clients. And jobs, labor market flexibility,

efficient bridging to permanent jobs,

training, lower unemployment rates,

and enhanced productivity-these are

the benefits staffing firms bring to the

economy.

Industry Outlook

The U.S. staffing industry is expected

to grow faster and add more new jobs

over the next decade than just about any

other industry, even taking into account

the Great Recession.

The employment services industry-

which is primarily staffing-will be

the ninth largest job-growth industry

in the U.S. from 2008 through 2018,

according to the most recent BLS

projections, released in November 2009

(see Figure 23).62

While BLS foresees total employment

growth of 10% in that period, it projects

nearly twice that rate of job growth-more

than 19%-in the employment services

industry. "The demand for temporary help

services is expected to generate much of the

growth," BLS said. "These services include

the placement of temporary workers and

those with specialized skills, such as health

care staff needed to meet the needs of

aging baby boomers."

BLS developed the projections during

the recession and before the nonfarm

employment trough hit bottom. The

agency notes that its assumption of

a full-employment recovery accounts

in part for its projected faster, above average

growth rates.63

With weak job growth so far two

years into the economic recovery-and

three years into the BLS projection-

attaining full employment (which, as

noted earlier, BLS defines as an unemployment

rate of 5.1%) seems unlikely

by 2018.

Nonetheless, over the course of the

10-year projection period, BLS expects

almost all job growth to come from

service sectors. Employment in goodsproducing

sectors is expected to decline,

except in construction. Job losses in

manufacturing will continue, but at a

slower pace. Job losses in the goodsproducing

sector will be principally due

to continued productivity gains.64

"Job gains in the construction sector

will be almost entirely offset by the

projected 1.2 million decline in manufacturing

during the 2008-18 period,"

BLS said. "The manufacturing sector's

seemingly large employment loss...

still represents a contrast to what was

experienced during the previous decade

when the sector lost 4.1 million jobs."

The construction sector lost nearly 1.5

million jobs during the Great Recession

and continued to decline through July

2010. It has since been hovering around

5.5 million workers.65 But construction spending continues to recede in 2011,66 so

the gains BLS anticipated may be elusive.

Manufacturing, however, has seen

gains since early 2010, adding 245,000

jobs through mid-2011, bringing total

employment in the sector to 11.7

million workers.67

In the service sectors, BLS said, the

fastest growth rate (averaging 2.4% per

year) is expected in educational services.

But the greatest number of jobs-4.2

million-will be created in the professional

and business services sector

(which includes staffing), followed by

health care and social assistance at four

million jobs.

Much of the increase in professional

and business services will come

from "business demand for consultants,

sophisticated computer networks, and a

variety of employment services to address

complex business issues," BLS said.

"Strong job growth is expected due to

continued business demand for advice on planning and logistics, implementation

of new technologies, and compliance

with workplace safety, environmental,

and employment regulations. Increasing

globalization, trends towards outsourcing

and mergers, and a heightened need

for security also provide opportunities for

consulting firms."

Strong growth in health care and social

assistance is driven largely by projected

changes in demographics: persons aged

65 years and older will grow from 12.7%

of the U.S. population in 2008 to 15.3%

in 2018, increasing to 51.4 million.

"Although cost pressures may dampen

employment growth in hospitals, they

are expected to help drive demand for

services provided by offices of health

practitioners, home health care services,

and individual and family services."

The BLS employment projections

assume slower growth in the U.S.

population, in the labor force, in productivity,

and in GDP.68 These measures-and assumptions-are all deeply

intertwined.

Even with BLS projecting that the

GDP annual average growth rate will

slow slightly from 2.5% over the previous

decade to 2.4% in its current 10-year

forecast, prospects for the staffing

industry remain favorable. ASA quarterly

survey data from 1992 through 2009

show that, with only one exception-the

fourth quarter of 2007, when the Great

Recession began-both temporary and

contract employment and sales grew

when GDP exceeded 2.0%.69 That's a

probability of 97%.

21 Million Jobs

It will be years before America returns

to full employment. There are many

ideas about how to foster job growth (see

the sidebar "What Is the Single Most

Important Step the U.S. Should Take to

Create More Jobs?" starting on page 19),

but the McKinsey Global Institute quantified

the challenge:70

"To return to prerecession employment

levels by 2020 and accommodate

the new entrants into the labor force, the

U.S. will need to create 21 million net

new jobs in this decade."

If recent U.S. economic and employment

trends endure, only 9.3 million

jobs will be created by the end of

the decade, according to one MGI

scenario-one that it termed "frighteningly

familiar."

In this low-job-growth scenario, the

weak U.S. job creation trend since 2000

would continue. Manufacturing employment

would further contract. The wave

of offshoring and automating administrative

and back-office work would persist,

and a new wave of automation in

retailing would ensue. Improved efficiencies

or significant cost controls in health

care could slow job growth in that sector.

And most new jobs would go to college

graduates.

MGI's high-job-growth scenario

would create 22.5 million net new jobs, which, if achieved, would barely return

the U.S. to full employment. What does

that scenario involve?

Six sectors offer the greatest potential

for job growth in this decade:

• Business services

• Construction

• Health care

• Leisure and hospitality

• Manufacturing

• Retail

These sectors account for 66% of employment

today, according to MGI's

analysis. But they could account for up to

85% of new jobs created through 2020.

"Health care is pivotal," MGI said, "with

the potential to create more than five

million new jobs." Manufacturing's role

in this scenario is less certain: it requires

completely stemming the tide of job

losses to overseas.

MGI cautioned that the U.S. will

not have enough workers with the

right education and training to fill the

jobs likely to be created. There will be

shortage of up to 1.5 million workers

with bachelor's degrees or higher in

2020, yet nearly six million Americans

without a high school diploma will be

unable to find work. Furthermore, too

few Americans in postsecondary education

select fields of study to prepare them

for occupations in demand.

"Given these challenges," MGI said,

"the U.S. will not return to full employment

by simply following a ‘business

as usual' course." The institute recommended

a four-pronged approach: Ensure that the work force acquires

the skills needed for the jobs that will

be in demand.

• Find ways for U.S. workers to win their share of the global economy.

• Encourage innovation, new business creation, and the scaling up of industries in the U.S.

• Remove unnecessary impediments that slow business investment and job creation.

Jobs Polarization

Massachusetts Institute of Technology

labor economist David Autor cited a

decades-long trend that significantly

intensified during the Great Recession:

the polarization of job opportunities

in the American labor market.71 U.S.

employment growth is becoming increasingly

concentrated in high-skill, highwage

jobs and low-skill, low-wage jobs

while the middle ground is shrinking.

Since the mid-1970s, Autor said, the

rise in U.S. education levels has not kept

up with the rising demand for skilled

workers. The slowdown in educational

attainment has been particularly severe

for men. The result has been a sharp

rise in wage disparity. In 1980, he noted,

workers with a four-year college degree

earned 50% more per hour than those

with a high school diploma. In 2008,

they earned 95% more.

An important factor behind the rising

wage gap is the polarization of job

opportunities: they are either high-skill,

high-wage professional, technical, or

managerial occupations, or they are lowskill,

low-wage food service, personal care,

or protective services jobs. Middle-skill,

white-collar clerical, administrative, and

sales occupations, and middle-skill, bluecollar

production, craft, and operative jobs

are in decline. Employment losses during

the Great Recession were more severe

in middle-skill white- and blue-collar

jobs than in either high-skill white-collar

occupations or in low-skill service jobs.

This phenomenon is not unique to

the U.S.; it is widespread across industrialized

economies. Key contributors are

the automation of routine work and, to

a lesser extent, the international integration

of labor markets through trade and,

more recently, offshoring.

Future of Staffing and Recruiting

What do these macroeconomic

trends mean for the U.S. staffing and

recruiting industry?

While economic and labor market forces favor both short- and longterm

growth for the industry, the most

successful firms will focus on the sectors

with the greatest potential for job creation.

Those that specialize in high-skill or low-skill

occupations will be better positioned

to meet the changing demands of business

in the post-recession economy.

With human capital replacing financial

capital as the engine of economic

prosperity, businesses need help in strategic

work force planning to correct

current and future imbalances between

labor supply and demand.72 Staffing

firms that develop expertise in helping

clients source, deploy, and manage

talent across a wide array of sectors will

enjoy tremendous opportunity.

Stellar performers in the industry will

be talent advocates and best places to

work. Exceptional firms will ensure the

well-being of candidates and employees

by matching them with ideal jobs, helping

them update their skills, protecting their

rights, and treating them with respect and

compassion.

America's staffing and recruiting

companies will play a bigger role than

ever in putting people back to work as the

nation recovers from the Great Recession.

Many of those jobs will start out

as temporary. Many of those jobs will

become permanent as businesses gain

confidence in the economic expansion.

By helping businesses discover and

tap talent when needed, America's

staffing and recruiting companies

improve the efficiency of the U.S. labor

market. By quickly matching talent to

work, they boost U.S. employment. By

creating jobs, they strengthen the U.S.

economy-and, therefore, America.

Steven P. Berchem, CSP, is vice president

of the American Staffing Association. Alexandra

Karaer, ASA director of research,

assisted in the preparation of this analysis.

To comment on this article, e-mail success@

americanstaffing.net.

Notes

National Bureau of Economic Research, Business Cycle Dating Committee, announcement

of June 2009 as the end of the recession that began in December 2007, Sept. 10,

2010.

2. U.S. Department of Labor, Bureau of Labor Statistics, "Current Establishment Survey

(National), Employees on Nonfarm Payrolls by Industry Sector and Selected Industry

Detail," July 14, 2011.

3. U.S. Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and

Earnings From the Current Employment Statistics Survey (National)," Web Site Public

Data Query, Series ID: CES6056132001, July 18, 2011.

4. American Staffing Association, "Employment and Sales Survey Report, First Quarter

2011," June 18, 2011, a proprietary report for survey participants only. Public data available

online at americanstaffing.net; click on Staffing Statistics.

5. Council of Economic Advisers, "Economic Report of the President: Transmitted to the

Congress January 2009," U.S. Government Printing Office, 2009.

6. Steven P. Berchem, "Staffing Jobs as Economic and Employment Indicators," American

Staffing Association, June 2009.

7. Ibid 3.

8. U.S. Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and

Earnings from the Current Employment Statistics survey (National)," Web Site Public

Data Query, Series ID: CES0000000001, July 19, 2011.

9. U.S. Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and

Earnings from the Current Employment Statistics survey (National)," Web Site Public

Data Query, Series ID: CEU6056132001, July 31, 2011.

10. U.S. Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and

Earnings from the Current Employment Statistics survey (National)," Web Site Public

Data Query, Series ID: CEU0000000001, July 20, 2011.

11. Jon Hilsenrath and Conor Dougherty, "Inside the Disappointing Comeback," Wall Street

Journal, July 5, 2011.

12. Jon Hilsenrath, "Weak Economic Rebound Suggests Statistical Parallels to 1980 and

Other Anemic Upturns," Wall Street Journal, July 5, 2011.

13. Ibid 12.

14. Federal Reserve Bank of Minneapolis, "The Recession and Recovery in Perspective,"

minneapolisfed.org/publications_papers/studies/recession_perspective, July 31, 2011.

15. U.S. Department of Commerce, Bureau of Economic Analysis, National Income and

Product Accounts Tables: "Table 1.1.1 Percent Change From Preceding Period in Real

Gross Domestic Product" and "Table 1.1.6 Real Gross Domestic Product, Chained

Dollars (2005)"; July 29, 2011.

16. Ibid 8.

17. U.S. Department of Labor, Bureau of Labor Statistics, "The Employment Situation-

June 2011," July 8, 2011.

18. U.S. Department of Labor, Bureau of Labor Statistics, "Labor Force Statistics From the

Current Population Survey," Web Site Public Data Query, Series ID: LNS14000000, July

31, 2011.

19. Ibid 17.

20. U.S. Department of Labor, Bureau of Labor Statistics, "Labor Force Statistics From the

Current Population Survey," Web Site Public Data Query, Series ID: LNS12300000, July

31, 2011.

21. Ibid 8.

22. Ibid 17.

23. Justin Lahart, "Number of the Week: 162," Wall Street Journal, July 16, 2011.

24. Ian D. Wyatt and Kathryn J. Byun, "Employment Outlook 2008-18: The U.S. Economy

to 2018: From Recession to Recovery," Monthly Labor Review, November 2009,

Bureau of Labor Statistics, U.S. Department of Labor.

25. Economic Forecasting Survey: July 2011, Wall Street Journal, wsj.com, July 19, 2011.

26. Jonathan McCarthy, "Discretionary Services Expenditures in This Business Cycle,"

Liberty Street Economics blog, Federal Reserve Bank of New York, July 6, 2011.

27. American Staffing Association, ASA Staffing Index, public data available online at americanstaffing.

net; click on Staffing Statistics.

28. Ibid 4.

29. U.S. Department of Labor, Bureau of Labor Statistics, Quarterly Census of Employment

and Wages, Temporary Help Supply Services, 1972-2008.

30. Calculated using American Staffing Association figures for temporary and contract staffing

employment (3.12 million in 2007, 2.18 million in 2009, and 2.58 in 2010; ibid 1) and

U.S. Bureau of Labor Statistics annual figures for total nonfarm employment (137.60

million in 2007, 130.81 million in 2009, and 129.82 in 2010; Web Site Public Data Query,

Series ID: CEU0000000001; July 20, 2011).

31. Steven P. Berchem, "A Profile of Temporary and Contract Employees: Who They Are

and What They Do," American Staffing Association, 2006.

32. Various public company reports as well as anecdotal reports from members of the

American Staffing Association, including members of the ASA board of directors at

meetings Jan. 25, 2009, through June 12, 2011.

33. U.S. Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and

Earnings From the Current Employment Statistics Survey," Web Site Public Data Query,

Series ID: CEU6056131001, July 20, 2011.

34. Ibid 4.

35. Staffing Industry Report, Staffing Industry Analysts Inc., April 2011.

36. Ibid 15.

37. Ibid 4.

38. Ibid 31.

39. Tom Brown, Stuart Crainer, Des Dearlove, and Jorge Nascimento Rodrigues; Business

Minds: Connect With the World's Greatest Management Thinkers, Prentice Hall, 2002.

40. Mindy Blodgett, "Managing Generation X," CNN.com, April 20, 1999.

41. World Economic Forum, in collaboration with the Boston Consulting Group, Global

Talent Risk-Seven Responses, 2011.

42. "CareerBuilder.com's Job Forecast: Q1 2006," CareerBuilder.com, 2006.

43. "2002 People at Work Survey," Mercer Human Resource Consulting, 2002.

44. "2005 United States What's Working Study," Mercer Human Resource Consulting,

2005.

45. Bureau of Labor Statistics, U.S. Department of Labor, "Contingent and Alternative

Employment Arrangements, February 2005," News Release, July 27, 2005.

46. American Staffing Association analysis of unpublished data from the Bureau of Labor

Statistics, U.S. Department of Labor. Data were from the contingent and alternative

employment arrangement supplement to the Current Population Survey conducted in

February 1995, 1997, 1999, and 2001. The supplemental survey was not conducted in

2003; it was resumed in 2005. The occupational distribution of the 2005 sample skewed

contrary to trends evident from the first four surveys. The survey may be subject to

errors related to the relatively small sample ("temporary help agency workers" n=344and "workers provided by contract firms" n=240) compounded by projecting that

sample to represent nearly 200 occupations over an estimated population of two million.

Given the skewing of the 2005 results, data from the next most recent survey (2001)

were used in Figure 18.

47. American Management Association, "1999 AMA Survey, Contingent Workers, Summary

of Findings."

48. Steven P. Berchem, "Flexibility and Talent: Top Assets-Staffing Industry Gets Good

Ratings in National Poll of Businesses," Staffing Success, May-June 2005, American

Staffing Association.

49. Erica L. Groshen and Simon Potter, "Has Structural Change Contributed to a Jobless

Recovery?" Current Issues in Economics and Finance, August 2003, Federal Reserve

Bank of New York.

50. Nandkumar Nayar and G. Lee Willinger, "Financial Implications of the Decision to

Increase Reliance on Contingent Labor," Decision Sciences, Vol. 32, No. 4, Fall 2001.

51. "Contingent Employment," HR Executive Review, Vol. 3, No. 2, Conference Board,

1995.

52. Gianpaolo Baiocchi, Sundari Baru, and Paula Chakravartty, "Just Getting By: The

Experience of Temporary Workers in San Diego's Economy," Center on Policy

Initiatives, October 2002.

53. James Manyika, Susan Lund, Byron Auguste, Lenny Mendonca, Tim Welsh, and

Sreenivas Ramaswamy, An Economy That Works: Job Creation and America's Future,

McKinsey Global Institute, June 2011.

54. Testimony of Chairman Alan Greenspan, Federal Reserve Board's Semiannual Monetary

Policy Report to the Congress, Before the Committee on Financial Services, U.S. House

of Representatives, July 20, 2005.

55. Andy Laperriere, "Questions for the Fed," Wall Street Journal, April 3, 2008.

56. Marcello Estevão and Saul Lach, "Measuring Temporary Labor Outsourcing in U.S.

Manufacturing," Employment Policies Institute, December 2001.

57. Council of Economic Advisers, Economic Report of the President, Transmitted to the

Congress January 2001, U.S. Government Printing Office, 2001.

58. Council of Economic Advisers, Economic Report of the President, Transmitted to the

Congress January 2004, U.S. Government Printing Office, 2004.

59. Lawrence F. Katz and Alan B. Krueger, "The High-Pressure U.S. Labor Market of the

1990s," Working Paper No. 416, Princeton University, May 1999.

60. Ibid 31.

61. Jon Hilsenrath and Brian Blackstone, "Behind Grim Jobs Data, a Potentially Hopeful

Sign," Wall Street Journal, Jan. 13, 2009.

62. Rose A. Woods, "Employment Outlook 2008-18: Industry Output and Employment

Projections to 2018," Monthly Labor Review, November 2009, Bureau of Labor

Statistics, U.S. Department of Labor.

63. Kristina J. Bartsch, "Employment Outlook 2008-18: The Employment Projections for

2008-18," Monthly Labor Review, November 2009, Bureau of Labor Statistics, U.S.

Department of Labor.

64. Ibid 62.

65. U.S. Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and

Earnings From the Current Employment Statistics Survey," Web Site Public Data Query,

Series ID: CES2000000001, July 21, 2011.

66. U.S. Department of Commerce, U.S. Census Bureau, news release, "May 2011

Construction at $753.5 Billion Annual Rate," July 1, 2011.

67. U.S. Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and

Earnings From the Current Employment Statistics Survey," Web Site Public Data Query,

Series ID: CES3000000001, July 21, 2011.

68. Ibid 63.

69. Ibid 1 and 4.

70. Ibid 53.

71. David Autor, "The Polarization of Job Opportunities in the U.S. Labor Market:

Implications for Employment and Earnings," Center for American Progress and the

Hamilton Project of the Brookings Institution, April 2010.

72. Ibid 41.

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