Another leading data in the United States to issue a recession warning! Executives have the opposite opinion: everyone is optimistic about the fourth quarter! This is more likely to signal a soft landing for the US economy...
The latest data show that temporary employment in the United States fell for six consecutive months, which may signal a recession in the future of the US economy.
Historically, changes in the number of temporary workers have tended to signal a turning point in the labor market and the economy, because when economic growth slows, temporary workers are the easiest to be laid off, that is, the number of temporary workers is the first to decline.
The number of temporary workers in the United States has declined, and historically, this decline has often been a precursor to recession
But executives disagree. Executives believe the decline in temporary hiring could represent a gradual cooling of the overheated job market and signal the possibility of a soft landing rather than a full-blown downturn. Richard Wahlquist, CEO of the American Short-Term Supply Association, said:
"As the third quarter draws to a close, I see more optimism. The decline in temporary employment does not mean that we are on the brink of a recession. ”
This could be good news for Fed Chairman Jerome Powell, who has focused on the labor market in order 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.
Speaking at the Fed's annual Jackson Hole central bank meeting on Aug. 25, Powell welcomed signs of a balancing market but said further progress was needed.
On Tuesday, he got some good news in this regard, with the Labor Department reporting that job openings fell to 8.83 million in July, the lowest level in more than two years but still well above pre-pandemic levels.
With the August non-farm payrolls report set up to be released on Friday, the Fed chairman will have more up-to-date insights into the labor market. The median forecast of economists polled by foreign media showed that nonfarm payrolls growth in August is expected to slow to 170,000 from 187,000 in July, although August data may be affected by the Hollywood actor strike.
Temporary worker data has been a leading indicator of the labor market
Historically, temp worker data has been a leading indicator of where the labor market is headed: they are the first jobs to be added when demand rises, and the easiest to lay off workers when economic growth slows.
On the surface, this is worrying. Aside from the pandemic, temporary employment has fallen for six consecutive months this year, the longest decline since the 2007-09 financial crisis. Jonas Prising, CEO of ManpowerGroup, a global staffing agency, said: "Our industry is clearly entering a recessionary environment".
But he believes the U.S. is roughly 50 percent likely to avoid a full-blown economic contraction. Because hiring and wage growth have fallen more slowly than he expected, companies have had trouble recruiting people after the pandemic, and they have been inclined to retain employees. "As long as employers decide to retain their employees, we have the potential to see a controlled decline and a soft landing in the economy," Prising said.
Tom Gimbel, CEO of Chicago-based LaSalle Network Inc., said today's labor market reminds him of 2017 and 2018, when demand for workers was steady but didn't break records. "I don't think there's a full-blown recession," he said.
The signal is not yet clear
Stacy McCoy, vice president of research and insight at HR agency EmployBridge, said the fact that a decline in the number of temporary workers isn't always a clear indicator that a recession is coming. Although the unemployment rate continues to fall, employment in the sector declined in 2019.
McCoy said the sluggish number of temporary employment could be a sign that workers are asking for full-time work rather than accepting less precarious temporary jobs. While the U.S. has lost about 205,000 temporary jobs since its peak in March 2022, most of them appear to have switched to full-time jobs, she said. McCoy said:
"Therefore, the weakness of the temporary worker data is not a sign of impending trouble, but is fully consistent with the tight labor market conditions."
Nela Richardson, chief economist at payroll management firm Automatic Data Processing Inc., among others, believes that the labor market is returning to some extent to normal after experiencing the wild swings during the pandemic. "After two extraordinary years of growth associated with economic recovery, we are moving towards more sustainable growth in wages and jobs as the impact of the pandemic fades," she said.
On Wednesday, ADP data, known as the "small non-farmer," showed that U.S. companies added the lowest number of jobs in August as the hiring boom in the leisure and hospitality sectors faded.
The weekly Human Resources Employment Index, compiled by the American Workforce Association, shows a recent recovery after a traditional summer downturn and a downward trend earlier this year. Wahlquist said:
"When I talk to CEOs of HR companies in most industries, they're all optimistic about the fourth quarter, and from what we've seen so far, the U.S. economy seems to have achieved a soft landing."