Event: The April Employment Situation, released today by the US Bureau of Labor Statistics (BLS), indicates that total nonfarm employment rose by +253,000 in April on a seasonally adjusted basis, while temporary help services employment fell by -23,300 jobs. The temporary agency penetration rate declined to 1.93% in April, from a revised March rate of 1.95%. The national unemployment rate declined to 3.4% from 3.5% in March, and the labor force participation rate remained at 62.6%.

Employment expanded in most industry groups. The group with the largest gain was Professional services (excluding temporary help), which added +66,300 jobs; followed by Health and social assistance, which added +64,200 jobs; and Leisure and hospitality, which added +31,000 jobs. Employment declined in two sectors. Employment fell in Temporary help services by -23,300; and employment in Wholesale trade fell by -2,200.

BLS Revisions: The change in total nonfarm payroll employment for February was revised down by 78,000, from +326,000 to +248,000, and the change for March was revised down by 71,000, from +236,000 to +165,000. With these revisions, employment in February and March combined is 149,000 lower than previously reported.

The change in temporary help services employment in February was revised down from a gain of +3,400 jobs to a loss of -9,600, and the previously estimated loss of -10,700 in March was revised down to a loss of 18,900. With these revisions, temporary help services employment in March was -21,200 lower than previously reported.

SIA’s Perspective: 

The US economy added +253,000 jobs in April, significantly higher than the median forecast in a Bloomberg survey of economists, which called for a gain of +185,000. Actual nonfarm payroll growth has exceeded forecasts for thirteen consecutive months. However, the trend in employment growth remains deceleration. In 2021, average monthly payroll growth was +606,000; in 2022, it was +399,000; and for 2023 through April, that figure is +285,000.

At 3.4%, the unemployment rate is near record lows and above only all-time lows seen in the early 1950s. The labor force participation rate remains at 62.6%, its highest rate since the onset of the pandemic but below the 63.3% rate seen at the end of 2019 and early 2020. The prime age labor force participation rate (those in the prime of their working years, ages 25 through 54, being largely done with their education and too young to retire) grew in April, from 83.1% in February and March to 83.3% in April. Additionally, the employment-to-population ratio for prime age workers was 80.8%, its highest value since April 2001 when it was 80.9% and only 1 point below its highest value in US history, 81.9% in April 2000.

Amid a strong and resilient labor market, labor scarcity remains a challenge. However, for such a strong labor market, the temporary help services industry is uncharacteristically weak. With today’s revised data, temporary help services employment has fallen each of the past three months, and is now 35,200 below its December 2022 level, even as total nonfarm employment has risen by 1,138,000. In broader context, even with recent weakness, temporary help employment remains elevated against its entire pre-pandemic history: The pre-COVID peak was 3,001,000 employees in October of 2018. One possible explanation consistent with these data is that, with widespread expectations of a recession, companies are taking precautionary measures such as cutting marketing expenses and decreasing their use of temporary and contract workers – even as labor scarcity sees them continue to retain and hire new direct employees.

Temporary help services growth is cooling after years of record highs, and our expectation remains for a plateauing of the industry in 2023. Even a plateau in the staffing industry implies continuing and large opportunities for those staffing firms that have developed a competitive advantage via either their technology, their service offerings, or both.

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