Hiring Temp vs. Full-Time Employment During an Economic Downturn

Though the economic outlook remains uncertain, the global labor market continues to be resilient. In the US, many industries are adding full-time jobs, just at a slower rate than before. Surprisingly, global contingent hiring remains low; in fact, temp hiring dropped substantially last year, which is contrary to previous economic downturns where companies have relied on contingent workers to cost-effectively supplement hiring needs.

In the past, temporary hiring labor trends have been a reliable indicator of a potential recession. This is because contingent workers are typically the first to be released when an organization is performing layoffs. Additionally, usage of temp workers are a sign of strength in the labor market as they are the first to be hired before an organization makes the investment in permanent employees. However, a slowdown in temp staffing doesn’t necessarily mean a recession is on the horizon. Ron Hetrick, a senior labor economist at Lightcast, stated, “Everything we’ve been experiencing [in the labor market] has never happened before.” Job vacancies stay open, indicating that employers are still navigating global talent shortages. Labor has become scarcer and better rewarded, especially in manual work where it is harder to replace with technology.

What Is Causing the Decline in Temp Staffing?

So, why has there been a decline in temp staffing despite a resilient labor force and an ongoing need for talent?For one, employers tend to hire conservatively during times of economic uncertainty and often refrain from executing large “one-time” projects that would require additional headcount until they feel the economy is healthy.

Additionally, due to talent shortages, there has been a shift in labor attraction and retention strategies. Since the “Great Resignation,” employers have preferred hiring full-time employees. In 2023, talent hoarding became a popular trend and many organizations focused on converting high-performing contractors into full-time workers. Similarly, employees prefer full-time roles because they are seeking stability, healthcare benefits, paid time off, greater flexibility and, in some cases, higher wages.

India has been an exception to this trend. India’s contingent workforce grew 5.9% quarter-on-quarter in the third quarter of 2023. This is faster than total employment growth, indicating that employers are relying more on contingent workers within India to fill roles. Due to economic uncertainties, contingent workers in India are an attractive alternative for employers as this region offers cost savings and a growing talent pool specifically within IT skill sets.

The number of US temp jobs fell every month in 2023 -- down by 242,000 since its peak in March 2022.

Despite a slowdown in contingent hires in 2023, Staffing Industry Analysts (SIA) does predict an increase in temporary staffing in 2024. The Ceridian 2023 Executive Survey found that 65% of respondents said they would increase their reliance on contingent workers in the next two years. Also, according to Verticalmove, the number of contract employees is expected to grow by 20% and contract employees are anticipated to make up 50% of the total workforce by 2025.

Moving into 2024, economists do expect global growth to remain stagnant, but this doesn’t necessarily mean companies should hold off on an investment in temporary labor. Hiring contract workers will provide a multitude of benefits such as cost-effective hiring, operational flexibility and the option to hire workers under a “trial period” before making the investment in full-time employees.

The next few graphs illustrate the growth of temp staffing (inclusive of all industries) within the US and the UK. The UK’s temp staffing numbers have shown a mostly linear trend since 2007 with dips that coincide with the global financial crisis, political shifts, and the COVID-19 pandemic.

UK Temp Help Services

Conversely, the US trend line illustrates a significant drop-off at the start of the Great Recession and a sharp decline in 2020 followed by historical high usage as a result of the post-pandemic bounce back. Currently, US temporary staffing employment levels sit below pre-pandemic usage and despite the UK’s contingent temporary usage being above pre-pandemic levels, growth declined through 2023.

US Temp Help Services

GDP is expected to remain stagnant for both the US and the UK in 2024. Economists will continue to closely monitor contingent labor hiring since temp usage is an indicator of full-time employment trends.

Looking to our own data, we see that our North American programs followed the same hiring trends as the market data.

Due to ongoing economic instability, many organizations right-sized in 2022 and 2023 by offloading IT talent that was hired in excess during the post-pandemic e-commerce boom.

As employers sit in anticipation of economic and monetary policy changes, we expect to see continued muted growth in 2024 across our customer portfolio, at least during the first half of the year.