Declines in temp employment preceded those in the overall labor market by 6 to 12 months before previous recessions. Now, temp employment peaked in March 2022 with a 16% drop, but total payroll employment has continued to rise.
Business leaders suggest a fundamental shift in the labor market in regard to temporary employment, influenced by pandemic-era labor shortages. Temp employment, formerly a business cycle indicator, may have lost its predictive value.
An inverted yield curve, a historical recession predictor, has been in place for a record two years without a recession. Other indicators like two consecutive quarters of negative GDP growth also do not always align with recessionary periods.
Changes in temporary employment patterns historically served as a significant indicator for upcoming shifts in the broader job market, notably ahead of recessions in 1991, 2001, and 2008. However, recent data shows that temporary employment declines have not correlated tightly with broader economic changes.
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