Weekly Economic & Business Outlook

Friday’s blockbuster jobs report provided an amalgam of positive signals about the health of the U.S. labor market: Nonfarm payrolls rose by 254,000 in the month of September; the unemployment rate ticked down to 4.1%; and compensation grew by 4%, ahead of a monthly inflation rate of just under 3%.

After a summer slowdown, these numbers indicated a significant turnabout in labor market activity. But why the sudden shift? Remember that the Federal Reserve recently reduced interest rates by 50 basis points. This turnaround aligns with broader expectations among employers who are anticipating lower borrowing costs in the short-term to bring down labor expenses in the long-term. Is this trend sustainable? Well, that depends on the Fed. With inflation running just under 3%, and largely attributable to continued persistence within the housing market, it is running out of justification to maintain interest rates at current levels absent risk of a resurgence, which did emerge with recent labor strikes among dockworkers on the East coast and among engineers at aerospace giant Boeing.

But these flare-ups appear to be resolving themselves, which means the Fed will soon see inflation trending near optimal levels, with excess borrowing costs constricting additional labor market growth. This means additional rate cuts are needed to sustain the gains seen in September. According to recent data from the Job Openings and Labor Turnover (JOLTS) survey, job openings within most super sectors increased, however; hiring has mostly stagnated or decreased. In other words, employers are encouraged by the Fed’s recent pivot on monetary policy but continue looking for additional signs of sustained deceleration in labor costs before filling open roles, thereby enabling greater churn within the labor market and providing more opportunities for the staffing industry.

ASA recently released the latest results from the ASA Staffing Employment and Sales survey. Established in 1992, the quarterly report provides key employment, payroll, sales, and gross margin benchmarks for staffing companies, with select breakouts by industry sector and company sales size.

The newly released second quarter 2024 numbers showed overall estimated temporary and contract staffing sales eased 1.6% from the first quarter of 2024 to the second quarter of 2024, and 13.8% from 2Q2023. Employment fell in a similar manner, as the industry shed 44,000 temporary jobs from the first quarter to the second—which translates to a decline of 2% quarter-to-quarter and 11.6% year-to-year.

More encouragingly, median quarter-to-quarter sales growth among responding companies was just slightly positive (0.2%) for the first time since 3Q2022. This could be a sign that the industry was nearing bottom by the second quarter of 2024, though the 3Q and 4Q surveys bear watching to see if the stabilizing trend continues.

By industry, companies saw median revenue growth in the industrial (4.0%); office–clerical and administrative (5.4%); engineering, IT, and scientific (6.2%); and professional–managerial (1.0%) sectors. On the other hand, companies reported a median decline of 8.8% in health care staffing revenue. How does your company compare? With the 3Q2024 survey opening this week, make sure you’re signed up—learn more about at americanstaffing.net/quarterly-survey.