Event: 

The January Employment Situation, released today by the US Bureau of Labor Statistics (BLS), indicates that total nonfarm employment rose by +143,000 in January on a seasonally adjusted basis, while temporary help services employment declined by -12,400 jobs. The temporary agency penetration rate was 1.59% in January, down 1 basis point from a revised 1.60% in December. The national unemployment rate declined slightly to 4.01% from a revised December rate of 4.09%.

The group with the largest gain was Health and social assistance, which added +66,000 jobs; followed by Retail Trade, which added +34,300 jobs; and Government,  which added +32,000 jobs. The greatest declines in employment were in the Temporary help industry, which fell by -12,400; the Natural Resources/mining sector, which fell by -7,000; and the Education sector, which declined by -4,400.

BLS Revisions:

The change in total nonfarm payroll employment for November was revised up by 49,000, from +212,000 to +261,000, and the change for December was revised up by 51,000, from +256,000 to +307,000. With these revisions, employment in November and December combined is 100,000 higher than previously reported.

As every February, the figures released today include the annual revisions to seasonal adjustment factors and the annual benchmark update. As a result, the temporary help employment figures differ meaningfully from previously released estimates, with the total number of temporary help employees in December -113,0100 (-4.3%) lower than indicated in the January Jobs Report. Note that this is a level shift, but with these changes, the BLS estimates that monthly growth or decline since mid-2023 was broadly weaker than previously indicated.

For the normal monthly revisions, it is not possible to fully isolate the impacts of monthly revisions from the benchmark and seasonal factor revisions, but the changes to the last few months are more substantial. Where the January Jobs Report indicated that temporary help services employment grew by +6,200 in November and +5,300 in December, today’s release indicates that temp help employment grew by +30,000 in November and declined by -3,000 in December.

SIA’s Perspective: 

The US economy added +143,000 jobs in January, below the +170,000 anticipated in a Reuters survey of economists. Revisions to BLS’ estimates now place all of the prior green shoots into a single-month surge, with November’s temporary help employment up +30,000 and a decline of -3,000 in December, instead of the consistent but far more moderate growth previously estimated for these months. Broadly, this adds to evidence that the recent growth in temp employment was driven in part by pre-buying and filling warehouses in anticipation of tariff-driven price increases.

The latest Job Openings and Labor Turnover release showed that, on a seasonally-adjusted basis, job openings declined by -556,000 in December, reversing momentum built up in prior months, which had seen openings increase by a revised +317,000 in November and +467,000 in October. Realized hiring activity picked up slightly, increasing by +89,000 in December, but this move is small relative to prior month’s job openings. As a result, the vacancy yield and implicit macro time-to-fill suggest increasing recruiting difficulty.

Overall hiring was greatest in Professional and business services, with 997,000 new hires in December; Leisure and hospitality, with 942,000; and Private Health care, with 773,000. The change in hiring in December was strongest in the Financial sector (+51,000) and the Retail trade sector (+45,000), and weakest in the Leisure and hospitality (-33,000) and Construction (-24,000) sectors.

For the temp-heavy sector groups of Manufacturing and Transportation, warehousing and utilities (TWU), the most recent JOLTS data indicate a continuation of recent trends. Hiring was effectively unchanged in Manufacturing, up +1,000 from 307,000 in November to 308,000 in December, with job openings continuing to decline. For the TWU aggregate, hiring remained near a recent high but declined slightly, from 323,000 in November to 319,000 in December. TWU job openings remained in the 300,000 to 350,000 band they’ve been trending in since August, but increased from 296,000 in November to 334,000 in December. Together, these important verticals for BLS temporary help employment appear to poised to trend sideways, suggesting limited support for staffing growth. However, the growth in BLS temporary help employment in recent months appears to stem from surging demand in the logistics space – driven by consumers and businesses pre-buying ahead of anticipated price increases due to expected trade restrictions. Without firming in these client verticals, this policy- and uncertainty-driven support for staffing demand may a prove a flash in the pan, disappearing once storehouses are filled or if the announced-enacted-delayed course of trade restrictions leads businesses to and consumers to no longer take them seriously.

At the local level, during 2024 (full calendar year versus full calendar year 2023), employment expanded most in the Houston-Woodlands-Sugar Land, TX metro area, up +72,200; followed by New York City, up +71,000 (+139,400 for the New York metro area); and the Dallas-Forth Worth-Arlington, TX metro area, up +70,700. Looking to recent trends, for areas with at least 100,000 jobs, the fastest rates of local employment growth over the past three months, were in Rochester, MN, with an average growth rate of +0.4% (4.7% annualized); Charleston-North Charleston, SC, with an average growth rate of +0.3% (annualized rate of 4.0%); and Stockton-Lodi, CA, with an average growth rate of +0.3% (annualized rate of +3.7%). Staffing agencies active across states and regions may wish to target these local areas with greater employment growth for potential business opportunities.

The overall labor force participation rate increased 10 basis points to 62.6 in January, while the prime age (25-54) rate likewise advanced by 10 basis points, from 83.4% to 83.5%. Aggregate hours of all employees in the manufacturing sector declined by -0.2% and production worker hours contracted -0.6%, following growth in both November and December. Transportation and warehousing hours likewise reversed from growth in December to a month-over-month contraction of -0.8% in January. For both sectors, this is something of a return to trend, with manufacturing continuing the deceleration it began in late 2022, and transportation and warehousing continues to move sideways. As these are major client verticals, this suggests ongoing weakness for staffing demand.

In June, we published a report describing our thoughts on the ongoing divergence of the staffing industry and the overall US economy, “Insights on the Recent Downturn in US Temporary Staffing 2024.” We strongly encourage readers to review this report for discussion of overarching factors underlying this weakness in staffing, as well as reasons for optimism. Also, in November we published, “United States Economic and Labor Market Trends 2024,” which compliments our monthly Jobs Report articles by providing medium- and long-term perspectives, including discussion of potential impacts from slowing labor supply growth and population aging. In 2025, we will also publish quarterly reports that provide more detailed discussions of short- and medium-term developments in the US economy and their implications for the staffing industry. We published the first of these quarterly reports earlier this week.

With most economists projecting continued, solid growth (real GDP growth of 2% or higher) in the US economy in 2025, we continue watching for signs of a durable uptick in demand for temporary staffing.

Competitive pressures remain high but opportunities remain for those staffing firms that have developed a competitive advantage via either their technology, their service offerings, or both.

Members may download this month’s jobs report or access our new interactive tool (beta) below: