USA TODAY International Edition
Good sign for economy: Firms add hours, temps
Businesses staff up to be ready for a rebound
Despite a pullback in hiring, U. S. employers seem to be preparing for a rebound.
Business isn’t exactly booming for Neema Hospitality, an owner of a dozen hotel franchises in the mid- Atlantic region, but it’s gradually improved from the depths of the COVID- 19 recession.
Hotel occupancy averaged 30% to 35% last month, down from 40% to 50% in a normal January – among the slowest months of the year – but that gap between crisis and pre- crisis revenue has narrowed slightly each month, says Sandeep Thakrar, the company's president.
More significantly, Thakrar says his hotels are starting to book stays for weddings, school athletic games and other events in the spring as Americans look forward to warmer weather and widespread vaccinations.
As a result, Thakrar has been looking to hire a couple of workers at each of his hotels for the past few months.
“We’re trying to get prepared for our busy season,” he says. “I’m optimistic about the second half of the year.”
Hiring temporary workers
He hasn’t had much luck. So Thakrar has brought on several temporary housekeepers and increased the hours of existing workers. He would prefer to hire permanent staffers, noting temporary employees can be expensive because the staffing firm charges a fee for its services.
Although last week’s jobs report showed that hiring was dismal for a second straight month in January amid COVID- 19 surges, employers added lots of temporary workers and worked existing employees more hours.
The dual trends point to growing demand from customers that represents a positive sign for an economy facing a tough winter, analysts say. Traditionally, as the nation emerges from recession, wary companies add contingent workers and more hours for current employees before hiring permanent staff several months later. In the meantime, longer workdays mean more income and spending for the economy.
Experts say that pattern is playing out in the current recovery.
“I think it’s probably a precursor of more hiring down the line,” says Michael Feroli, chief U. S. economist of J. P. Morgan.
Not hiring permanent workers
Yet that dynamic is complicated by factors unique to the pandemic- induced downturn. Some businesses aren’t hiring permanent workers because they don’t know what their business will look like when life starts returning to normal. And many Americans aren’t even looking for jobs because they’re afraid of contracting the coronavirus, they’re caring for kids who are remote learning from home, or they’re receiving generous unemployment benefits, Thakrar and other business owners say.
The pickup in temporary workers and hours is consistent with other signs of a recovering economy despite COVID- 19 spikes and renewed business lockdowns that led to 227,000 job losses in December and a paltry 49,000 gains in January. There were 6.6 million U. S. job openings in December, up by 74,000 from the previous month and by 600,000 from June, though below the 7 million pre- crisis total, the Labor Department said this week. And online job postings on Indeed recently edged slightly above the pre- pandemic level.
Cautious firms turn to temps
In January, employers added 81,000 temporary workers on a seasonally adjusted basis, capping several months of strong gains. Typically, temps are the first to be cut in a downturn and the first to be brought back in a recovery. Companies shed about 1 million temps in March and April – including those dispatched by staffing agencies but not independent contractors and other gig workers – and have added back 757,000, or 76%. By contrast, the U. S. has recouped 57% of the total 22.4 million jobs lost last spring, when states forced restaurants, malls and other outlets to shut down to curb the spread of the virus.
The strong gains in January can partly be traced to decisions by retailers to hold on to many of the temporary workers they hired for the holiday season to handle returns, says Amy Glaser, senior vice president of staffing firm Adecco. The shift to e- commerce, accelerated during the pandemic, meant more purchases sight unseen and thus more returns, she says. Also, the contact tracers and temperature takers hired during the pandemic are typically temporary employees, Glaser says.
Hiring in tech, pharma and finance
Yet businesses are also turning to temporary and contract workers for more fundamental reasons. While restaurants, shops and many hotels have cut jobs again amid the coronavirus spikes, other industries continue to thrive and hire in the home- centered economy, including technology, e- commerce, manufacturing, pharmaceuticals, and finance, staffing experts say.
And even though millions of restaurant, retail, airline and event planning workers have been laid off, many others have squirreled away stimulus checks and saved money by not eating out or traveling. Americans have saved about $ 1.5 trillion during the crisis, according to Wells Fargo.
By using temporary and contract workers, “Businesses can ramp up operations quickly to meet client and consumer demands without the fear of bringing back permanent employees who might have to be laid off if the recovery is not proved to be sustainable,” says Richard Wahlquist, CEO of the American Staffing Association, which represents staffing firms.
Job openings for contractors now make up 40% of all U. S. online job postings, up from 23% in December, says Raleen Gagnon, vice president of global market intelligence at Manpower Group, a staffing company. Many manufacturers, call centers and warehouses are hiring more temps and then converting a growing share to permanent staffers, Glaser says.
Uncertain post- pandemic world
Many businesses are bringing on temps because they don’t know what to expect as the vaccine rolls out more widely in the spring and summer and
“We’re seeing organizations finding it incredibly difficult to workforce plan in the current environment,” says Michael Smith, Global CEO for Randstad Sourceright.
For example, he says, banks have largely shifted their focus to online banking, with branches closed or open for limited hours and services. A banking client that recently needed to staff up decided to hire a temporary customer service employee to work at home.
“They have no idea whether they’ll be going back to” a traditional level of retail banking once the pandemic is largely in the rearview mirror, Smith says.
Or take furniture and electronics makers and retailers, he says, which have seen sales soar as consumers sit at home.
“You do see hesitation” to hire permanent workers because they wonder if their strong sales boil down to a “false bubble,” Smith says. “Will the pent- up demand remain?”
Other companies would like to hire permanent staffers but can’t find them. Many Americans have COVID- 19 or fear of contracting the disease, or are caring for sick relatives or children being homeschooled. Some companies have recruited a platoon of temporary workers to fill in, Glaser and Smith say. The share of people working or looking for jobs dipped to 61.4% in January, down from 63.4% pre- pandemic and near the lowest level since the 1970s.
Struggling to find workers
Thakrar of Neema Hospitality, which owns hotels in Pennsylvania, Maryland and West Virginia, says managers recently scheduled 10 interviews but only two or three candidates showed up. With starting wages of $ 10 to $ 11, Thakrar says he can’t compete with the likes of Target and warehouses, where workers can start at $ 15 and higher. He also believes some young Americans who are unemployed may prefer to get unemployment benefits – enhanced by a $ 300 federal supplement under a bill passed in December.
“The managers tell me no one wants to work,” he says.
Judy Briggs says she has faced a similar problem. The owner of MaidPro and Men in Kilts ( window and gutter cleaning) franchises in Hopkinton, Massachusetts, says she has been trying to hire 24 workers at the two businesses since August, with sales rising as people feel more comfortable about having workers in their homes. But she has only filled about half the openings.
Last week, she scheduled three interviews but “none of them showed up.”
“The extended unemployment benefits have been detrimental to our hiring needs,” she says.
Heidi Shierholz, senior economist for the left- leaning Economic Policy Institute, disputed that the jobless would prefer to draw benefits that last months rather than a permanent job, especially since there were 1.6 unemployed people for every job opening in December.
Another reason some may be struggling to find workers even while unemployment remains high at 6.3% is that many laid- off restaurant and retail workers don’t have the skills for growing fields such as technology and need to be retrained, says Brian Kropp, a group vice president who oversees Gartner’s human resources practice.
To attract candidates, Briggs says she has increased starting pay at Men in Kilts from $ 13 to $ 15 but to no avail.
Like Thakrar, Briggs is giving workers more hours, with some putting in overtime, which requires that they receive time- and- a- half pay for each hour they log over 40. Nationally, Americans worked an average of 35 hours a week in January after seasonal adjustments, the most on records dating to 2006.
As a result, total labor income increased 1.1% in January, Feroli of J. P. Morgan says. “That is very large gain," he says, "and one that should support solid consumer spending.”