Event: 

The February Employment Situation, released today by the US Bureau of Labor Statistics (BLS), indicates that total nonfarm employment rose by +151,000 in February on a seasonally adjusted basis, while temporary help services employment declined by -12,300 jobs. The temporary agency penetration rate was 1.59% in February, nearly unchanged from a revised 1.60% in January. The national unemployment rate increased to 4.1% compared to a revised January rate of 4.0%.

Employment expanded in most industry groups. The group with the largest gain was Health and social assistance, which added +63,100 jobs; followed by Financial Activities, which added +21,000 jobs; and Construction,  which added +19,000 jobs. The greatest declines in employment were in the Leisure and hospitality sector, which fell by -16,000; the Temporary Help industry, which fell by -12,300; and the Retail Trade sector, which declined by -6,300.

BLS Revisions:

The change in total nonfarm payroll employment for December was revised up by 16,000, from +307,000 to +323,000, and the change for January was revised down by 18,000, from +143,000 to +125,000. With these revisions, employment in December and January combined is 2,000 lower than previously reported.

The change in temporary help services employment in December was revised up, from a decrease of -3,000 to an increase of +1,700, and the previously estimated January decrease of -12,400 was revised up to a loss of -10,300. On net, temporary help services employment in January was 6,800 higher than previously reported.

SIA’s Perspective: 

The US economy added +151,000 jobs in February, below the +160,000 anticipated in both the Bloomberg and Reuters surveys of economists. The overall labor force participation rate declined by 20 basis points in February, falling from 62.6 to 62.4, while the prime age (25-54) rate was unchanged at 83.5%.

In the manufacturing sector, aggregate hours of all employees increased 0.1% in February vs January, with nonsupervisory employee hours up 0.5% and nonsupervisory employee overtime hours up sharply, +5.6% in February vs January. Aggregate hours also advanced in the transportation and warehousing sector, with hours worked by all employees up 0.3% and nonsupervisory employees up 0.7% in the month. Normally, such advances in labor utilization in these large client verticals would correspond with increases in temporary help employment, but that is not visible today and these changes may correspond to transitory factors related to the unprecedented +63% surge in imports of industrial supplies in January (single-month increase vs December).

Normally, we include discussion of Job Openings and Labor Turnover data in these articles. However, for this month these data will not be released by the US Bureau of Labor Statistics until March 11^th – another four days out. So, I would instead like to address some recent developments and data that has attracted significant attention among economy-watchers: The Federal Reserve Bank of Atlanta GDPNow economic indicator.

GDPNow is a “nowcast” model that leverages monthly data to produce an early measure of the rate of current-quarter GDP growth that is consistent with available measures of economic activity ranging from labor market data, orders and shipments, international trade, consumer sentiment, business surveys, and many other topic areas and data sources. Historically, GDPNow is similar in accuracy to the Blue Chip consensus forecast.

Early in 2025, GDPNow indicated that real GDP growth for Q1 2025, given more immediate measures of economic activity, was consistent with a growth rate of +2.3%, effectively unchanged from growth in Q4 2024. However, when the GDPNow estimates were updated on Friday, February 28th, incorporating data on international trade during January, the suggested Q1 2025 growth rate cratered to -1.5%. With additional availability of the Manufacturing PMI and construction spending data on Monday, March 3rd, the GDPNow measure declined further, suggesting Q1 2025 real GDP growth of -2.8%.

Just as historically-reliable relationships between staffing and GDP growth failed to accurately predict staffing activity in recent years, there are valid reasons to believe that GDPNow is excessively pessimistic at this time. Notably, the largest-single factor in the dramatic reversal in the GDPNow Q1 2025 estimate is a surge in imports of industrial supplies during January.

Imports of these materials in January expanded at their second-highest rate on record outside of the immediate post-lockdown period in 2020, up 63% month-over-month on a seasonally adjusted basis and 60% on a not-seasonally adjusted basis.

This movement can instead be read as further evidence that businesses and consumers sought to buy ahead of tariffs over the course of November and December. Note that business orders often require a month or more to fulfill - so the import surge in industrial materials in January likely reflects orders placed during Q4 2024. This also provides further evidence that the recent improved but volatile conditions for staffing and specifically industrial staffing in logistics, transportation, and warehousing activities, resulted from consumer and business efforts to make purchases and fill inventories and warehouses prior to anticipated tariff impacts.

A similar pattern shows up in monthly consumer spending data - an acceleration in November and December and a pullback in January, most intensely in consumer durables purchases (appliances, vehicles, furniture, electronics, and so on).

The recent changes in GDPNow are most likely excessively pessimistic, due to situational changes in short-term economic data that are unlikely to repeat, and though GDPNow has a reasonable track record for accuracy, it and similar tools are likely providing an inaccurate picture in the present.

That said, several recent indicators point the same way - an increase in the pace of deceleration in the US economy - and several factors that will impact the labor market are not yet reflected in the data and may not be visible in quantitative measures until April. Most notably, the reductions in the federal workforce will not fully show up in the Jobs Report data due the timing of these staffing changes: they occurred after the time period reflected in today’s numbers (the Jobs Report data reflect the pay period containing the 12th of the month, or typically the first two weeks of the month). We should expect more dislocation in the data over the near term.

Other recent events bear comment. On Tuesday, March 4th the United States instituted tariffs of 25% on imports from Canada and Mexico, and increased the already-enacted 10% tariff on Chinese products to 20%. In the evening of March 4th, the Trump Administration indicated ongoing talks with the Canadian and Mexican governments that may see these tariffs removed. The situation remains fluid, and at the time of this writing collection of import taxes has been delayed by a further month for a majority of trade within North America. If implemented, these steep taxes will drive significant changes to cost structures across economic sectors and adjustment is a slow process. For example, a large portion of lumber used in construction in the United States comes from commercial forestry in Canada. The timber yield of US forestry operations can increase to provide more domestically-sourced wood, but planting and growing new trees to expand that output is a slow process – even fast-growing trees require three or more years of growth before they can be harvested. In the interim, new taxes on Canadian lumber would simply increase prices – increasing profits for US forestry and costs for US construction – and gains to US forestry employment and output would only materialize gradually as output capacity grows.

Finally, we remain in a unique environment where businesses report extremely high levels of optimism concurrent with similarly elevated uncertainty; typically, these are opposing forces. To paraphrase remarks from several staffing firms, both public companies in their recent earnings calls and private companies in one-on-one conversation: Clients may be the most optimistic they have ever reported - but no one is acting on that optimism and projects and programs remain stalled. Should optimism begin to win out, and clients start moving on planned projects, we anticipate significant support for renewed staffing activity. However, we currently expect the dominating headwinds of uncertainty will remain with us for some time and the staffing environment will remain challenged.

Uncertain environments increase the importance of flexibility and the capacity to respond rapidly to new developments: just what staffing companies provide. It may be a good time to remind clients of this value proposition.

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: