The hiring of temporary workers has been a leading indicator of improvement in jobless claims during past recessions. Investors are wondering if this recession will yield the same result, or if the change in hiring of temporary workers signals something different. The January jobs report from the U.S. Bureau of Labor Statistics said that the unemployment rate fell from 10.0-9.7%. The same report also said that temporary help services "added jobs." This statistic continues upon the same path of the prior months between July and December 2009, where we saw an increase of 166,000 hired temporary workers. Do these data points indicate a bridge to healthy job creation? (For more, see Economic Indicators: Overview.)
IN PICTURES: Eight Ways To Survive A Market Downturn

2010 Recovery ... A Little Different
In the past, an increase in hiring of temporary workers signaled an increase in the hiring of permanent workers. This time seems to be a little different, as jobless claims have risen in six of eight weeks in 2010, but the hiring of temporary workers continued to trend higher through January. It appears manufacturing companies, unsure about demand, are hiring temp workers, but not making them permanent. The expectation is that this recovery for temp workers will follow the path, albeit at a faster pace. From 2002 and 1991, it took between 22-31 months to create 250,000 temp jobs, while the 2009-2010 recovery has seen similar amounts of jobs created in only four months (October-January). (For more, check out A Review Of Past Recessions.)

Playing a Better Temp Jobs Picture
Investors who believe that the permanent employment picture is not about to improve can play this thesis by investing in temporary worker firms. Robert Half (NYSE:RHI), a leader in temporary placement for the finance and accounting industries, reported fourth quarter 2009 results in which each of its staffing divisions reported sequential revenue growth. Similarly, Kelly Services (NasdaqGS:KELYA) posted strong fourth quarter results due to an improved temp worker picture, and that trend of temporary staffing hiring continued into 2010. Manpower (NYSE:MAN) has a strong presence in Europe, specifically France which has shown a strong resurgence in temp workers. Overall, 10% of its revenues come from the U.S. Additionally, MAN has a job search business. Taken together, as the employment picture improves globally, more searches and placements will benefit from its business model. Volt Information Sciences (NYSE:VOL) provides staffing services in the U.S. and Europe. The company focuses on staffing in the technology field - a segment of the economy which has been growing, as firms begin spending capital on improving technology infrastructure. While investors await the results from the restatement of earnings, the improvements in the technology temp workers should benefit the company.

The Bottom Line
Despite whether we see an improvement in the employment picture, the hiring of temporary workers as a way to remain flexible as fears of a struggling economy persists seems to be a constant trend in this recovery. Temp firms should benefit from this trend. RHI executives, during the company's recent earnings release commented that this recovery is non-discriminating in terms of which types of temp workers are being sought. Typically in a downturn, the admin side gets cut first and most, and usually comes back first. This time it seems firms cut "indiscriminately" and deeply across the board and are seeking all types of workers at the onset of this recovery. As such, specialized as well as generalized firms should benefit equally. (For more, check out What You Need To Know About The Unemployment Report.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Professionals

    How to Protect Your Portfolio from a Market Crash

    Although market crashes are usually bad news for your portfolio, there are several ways to minimize losses or even profit outright from market movement.
  2. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  3. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  4. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  5. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  6. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  7. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  8. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  9. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  10. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!