Temp Staffing: Recession to Recovery, The Long Journey

With the roller coaster ride in employment (or lack of employment) in the US since 2007, it’s little wonder why banks, venture capitalists, and some secondary lenders have lately shied away from, or stopped lending to, staffing and recruitment firms.  According to The American Staffing Association’s (ASA) Staffing Industry Economic Analysis, 1.14 million jobs (37% of the temp staffing workforce) were lost during the 2007 – 2009 recession.  July 2009 marked a turning and recovery point for the economy.  ASA introduced their Staffing Index in 2006, which at that point was set at 100.  The low point (trough) for the Index was 70 the week of June 29, 2009, but has grown almost non-stop since then.  Incidentally, the index peaked at 110 during several weeks of the fourth quarter in 2007.

There are an estimated 20,000 staffing firm offices in the US, with a current average daily employment of 3 million temporary and contract workers.  Staffing employment declined from it’s high of 3.06 million average daily workers in the fourth quarter of 2007, to 2.76 million workers in the 1st quarter of 2008.  2nd Q 2008 numbers dropped again to 2.75 million, and to 2.46 million in the 4Q, which was a 19.5% drop from it’s high in 2007.  By the 2nd Q of 2009, the number of temp staffing workers had dropped to 1.92 million, which was 37% less than in 2007!  Growth started again in the 3rd Q of 2009.

Total US employment (all job sectors) took a beating during the recession as well.  More jobs were lost during 2007 – 09 than had been created in the previous expansion period (after the 2001 recession).  Non-farm employment peaked in December 2007 at 138 million jobs, but by 2009, had bottomed out at 130 million jobs.  Overall unemployment jumped from 4.4% in 2007 to 10.1% in 2009, and still remains just over 9%.  BLS defines “unemployed” as all persons who are without jobs and are actively seeking and available to work.  If you add the “under-employed” to this list (working part-time due to lack of full time employment) and over 17 million Americans lost their jobs during the recession!  Talk about a long road to recovery.

So what’s the “new normal” for full employment?  Most Federal Reserve governors and bank presidents project that the unemployment rate will remain at above 7% through 2012 (according to the minutes of their June 2010 meeting).  Half of the economists surveyed in the Wall Street Journal in early July 2010 expect unemployment to drop below 5.5% by 2015.  BLS considers full employment at 5.1%, but may have to shift that higher due to the severity of the 2007 – 09 recession.

How about total sales for the temp staffing industry?  US temp/contract staffing sales for 2009 totaled $53.5 billion, which was 24% ($17 billion) less than 2008, and the least since the 2001 recession.  There have been four down years since the ASA index was tracked: 2001, 02, 08 & 09.  Fortunately temp sales were up 10% starting in Q1 2010.  Combining temp/contract services with search/placement/direct hire services, the total industry sales were $61 billion in 2009, or 29% less than in 2008.

Would YOU think twice before lending money to staffing companies, given the recent turmoil in the economy and in the industry?  You may think twice about it, but we are more bullish than ever on the staffing industry.  As a matter of fact, we grew our lending business by over 300% this past year, because we know the industry (been there, done that), have owned and operated staffing companies, and have survived a recession or two.  In short, we are not just a lender that happens to lend to staffing folks, we are staffing folks that lend to entrepreneurs that are on the front line putting people to work every day.

If you would like to discuss your situation, please give Dale Busbee, VP of Business Development a call at (985) 641-8817 or send him an email to dale@prosperityfunding.com.