The Canary in the Coal Mine

Temp Hiring Slowdown Signals Job Market Ills

The labor market in August entered a troubling holding pattern. After relatively mild improvements earlier this year, the key indicators of the strength of the labor market show virtually no improvement in recent months. The private sector added an average of 78,000 jobs each month for the past three months, not nearly enough to begin to reduce unemployment, which was at 9.6 percent in August. Anemic job gains will limit the path of this economic recovery and we need bold action to boost consumption and bring unemployment down.

Monthly net change in private sector jobs (in thousands)

This month’s further slowdown in temporary help hiring growth may be the “canary in the coal mine” for what’s to come this fall. Temporary help added another 16,800 jobs in August, but this is a much slower pace than the fourth quarter of 2009, when this sector added an average of over 60,000 jobs each month. Temporary help is typically an early indicator of hiring. Since April, lackluster hiring in temporary help provided an early sign that firms were under no pressure to ramp up hiring.

Three-month net change for temporary and total nonfarm employees (in thousands)

New steps are needed to bolster stronger economic growth. The American Recovery and Reinvestment Act of 2009 was a bold step, reversing the dramatic job losses anticipated in the Great Recession by saving or creating 1.4 million to 3.3 million jobs, according to analysis by the nonpartisan Congressional Budget Office. The pace of job losses slowed as the recovery dollars poured into the economy, but as those dollars have faded, job growth has stalled.

But policymakers need to further boost employment opportunities. At the very least, the Senate should quickly pass the Small Business Jobs and Credit Act of 2010 when they return to Washington. Small businesses continue to struggle and this legislation would create a $30 billion small business lending fund and provide $12 billion in tax breaks to help small businesses. Congress should also focus on a broader array of policies that would boost demand and work to bring unemployment down.

Heather Boushey is a Senior Economist at American Progress.

For more analysis on this month’s jobs numbers see: