Event: 

The October Employment Situation, released today by the US Bureau of Labor Statistics (BLS), indicates that total nonfarm employment rose by +12,000 in October on a seasonally adjusted basis, while temporary help services employment declined by -48,500 jobs. The temporary agency penetration rate was 1.64% in October, down from a revised 1.67% in September. The national unemployment rate was increased by 9 basis points to 4.14% from to a revised September rate of 4.05%.                                       

Employment across industry groups fell into one of three categories this month: meaningful expansion, little change, or meaningful contraction. The group with the largest gain was Health and social assistance, which added +51,300 jobs; followed by Government, which added +40,000 jobs; and Wholesale Trade, which added +10,400 jobs. The greatest declines in employment were in the Temporary Help industry, which fell by -48,500; the Manufacturing sector, which fell by -46,000; and the Retail Trade sector, which declined by -6,400.

BLS Revisions:

The change in total nonfarm payroll employment for August was revised down by 81,000, from +159,000 to +78,000, and the change for September was revised down by 31,000, from +254,000 to +223,000. With these revisions, employment in August and September combined is 112,000 lower than previously reported.

The change in temporary help services employment in August was revised down, from a decrease of -6,500 to a decrease of -23,300, and the previously estimated September decrease of -13,800 was revised down to a loss of -20,200. On net, temporary help services employment in September was -23,200 lower than previously reported.

SIA’s Perspective: 

The US economy added just +12,000 jobs in October, dramatically below the +110,000 median forecast in the Bloomberg and +115,000 Reuters surveys of economists.

As the BLS data reflect employment during the pay period including October 12^th, today’s figures are negatively impacted by the disruption and damage of hurricanes Helene and Milton. Additionally impacting the October employment figures, 33,000 Boeing workers were on strike during the reference period and remain on strike today, and an additional 11,000 workers were on strike elsewhere within the manufacturing sector. It is also possible that additional workers upstream in impacted supply chains are also out of work as a result, and likewise that companies in these supply chains have delayed hiring plans until after the conclusion of the strikes.

The unexpected and extreme decline in temporary help suggests strike activity and potentially the hurricanes as well weighed heavily on demand for production labor broadly in October, and by headcount and number of hours, that slice represents the largest share of the temporary help workforce. Reviewing occupational data, employment in production activities declined by 283,000 in October. Hopefully, work stoppages will end soon and rebuilding from hurricane damage proceeds rapidly.

This week’s Job Openings and Labor Turnover release showed continued decline in the number of job openings, but hiring activity picked up. While hiring remains lower than in the first half of the year, it has increased for each of the past three months, after bottoming out in June. This expansion primarily reflects a summertime rebound in hiring activity in the Leisure and hospitality and Professional and business services sectors. Advances in hiring in September were concentrated in the Manufacturing, Retail trade, and Transportation and warehousing. While these data are noisy and tend to alternate between growth and contraction, firming hiring activity – particularly from manufacturing – is a positive sign for staffing.

Using the JOLTS data, it is possible to calculate an economy-wide time-to-fill metric. This suggests that in September, filling a job opening required an average vacancy duration of 1.34 months. This remains higher than any period prior to COVID, when the peak was 1.31 months in September 2018, but is dramatically lower than the all-time peak of 1.84 months in March 2022. These peaks coincide with the pre-pandemic and pandemic era maximums in temporary help services employment, and temporary help follows growth and contraction in this measure of vacancy duration. This suggests the US labor market was still normalizing from the pandemic shock even in September, and a durable rebound in temporary help may remain a ways out.

Employment gains during the year (September 2024 versus December 2023) have proven uneven across states. While the most-populous states unsurprisingly post the greatest employment gains, California and Texas stand out. Employment expansion in Texas far outpaced its size, expanding 255,400 (+1.8%) over 2024 through September, while California’s growth was lackluster, expanding only 148,800 (+0.8%). Other states which have outperformed in employment growth include Pennsylvania, up 89,900 (+1.5%), Missouri, up 64,200 (+2.1%), and South Carolina, up 59,500 (+2.5%). Staffing agencies active across states and regions may wish to target these faster-growing states for business opportunities.

Overall labor force participation declined by 10 basis points, from 67.7% in September to 67.6% in October, and the prime age (25-54) labor force participation rate declined 30 basis points to 83.5%, but this remains higher than at any point between from June 2002 through June 2023.

Aggregate hours worked in manufacturing declined sharply in October, falling 1.1% from September. Overtime likewise declined, but not so dramatically, falling -0.6%. As overtime is typically about 2.5x more volatile than aggregate manufacturing hours, this suggests that manufacturers with facilities in both hurricane-impacted and other regions shifted work to un-impacted facilities to offset production losses as facilities and communities are rebuilt.

Aggregate hours in the similarly important transportation and warehousing sector likewise declined in October, falling -0.6% M/M. As manufacturing activity drives a large portion of transportation activity, this likely follows on from the strike- and hurricane-related production slowdowns.

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.

With most economists projecting solid growth in the US economy this year (real GDP growth of 2% or higher), we are keeping our eyes open for signs of an eventual uptick in demand for temporary staffing. The just-released “advance” estimate of Q3 real GDP indicates an annualized growth rate of 2.8% in Q3, bringing the average rate through September to 2.5%. High-frequency estimates and “nowcasts” indicate continued strength in Q4, suggesting full-year GDP will be come in near this three-quarter average.

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: