The Wall Street Journal noted the weakness in the temporary employment sector in recent months. It is down by 2 percent since the start of the year according to the Bureau of Labor Statistics establishment survey. The situation may actually be somewhat worse than the data show. Many of the jobs that are imputed into the establishment survey for new firms are in the temp sector. When the economy hits a turning point, this imputation will lead to an overstatement or understatement of employment growth. In this case, with the economy slowing, it is likely that the imputation has overstated job growth in the temp sector, which means that the market is somewhat weaker than the data imply. Employment in the temp sector has come to be seen as a harbinger of the future direction of the labor market, since employers will often add temps before they hire full-time employees and also will be more quick to layoff temporary workers than regular employees.
--Dean Baker
