Is the temp work boom permanent?

Temporary help hiring has been one of the bright spots in an otherwise stumbling recovery. While other sectors continue to struggle, temp work numbers are back to pre-recession levels in Minnesota.

But here I come barging in the door with the cranky economist question: Is that OK?

Conventional wisdom says growth in temp jobs leads the way out of recession. Companies see better times ahead but go with temps first to handle the growing business demand and convert to permanent workers when they're certain the recovery is for real.

This time around, the worry is the spike we've seen in temp work is permanent and that the "new normal" includes a workforce that will operate with a high percentage of temps, trapping workers in jobs with no long term prospects and limiting the growth in new, permanent full-time jobs.

The data, though, tell us we shouldn't worry. Not yet, anyway.

Even with the jump the past year, temporary staffing jobs made up only 2.4 percent of Minnesota's total statewide employment in the third quarter of 2010 and 3.1 percent in the Twin Cities labor market, according to data from the Minnesota Department of Employment and Economic Development.

Here's a chart looking at employment by temporary staffing firms in the Twin Cities and statewide. About 80 percent of Minnesota's temp staffing is in The Cities.

The third quarter data is the most recent available from DEED. It shows that the percentage of temp staffing in the state really is not out of the ordinary.

It's the speed of the temp turnaround that's surprising.

The chart shows it took about six years for temp staffing to return to pre-recession levels following the milder 2001 downturn. This time, it's taken only three years to recover during a much worse economy.

"It is really interesting that the employment staffing industry recovery is so strong. It is certainly stronger than our last recession even though this recession was deeper," says Kyle Uphoff, a state labor analyst. "It probably mirrors the hesitation of employers to take on full time staff."

If firms can remain competitive with temp workers, "they could make this a permanent strategy -- particularly if they rely on lower skill workers. However," he adds, "it is still way too early to make that pronouncement."

At this point, there's nothing to indicate the jump in the number and percentage of temp workers in Minnesota is a long term worry.

I'm reminded, though, of a piece Chris Farrell wrote for MinnEcon last year.

He looked at research showing the long term problems temp work causes for low-skill, low-educated workers. "Employment Research suggest that temp work actually lowers a worker's employment and income prospects over time," he wrote. "It doesn't lead to full time work."

That could be the biggest permanent problem in temp labor.

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BONUS INFO:

Last spring, a Minneapolis Federal Reserve survey found a surge in temp demand across the Upper Midwest (click on the chart for a larger view).

My MPR colleagues have examined the issue in different ways lately, including Mike Caputo's conversation with MPR readers and Molly Bloom's MinnEcon post -- Temp work, permanent anxiety.

The Star Tribune also wrote a detailed piece recently on temp workers.

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