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STATEWIDE

Hello, goodbye

Tar Heel employers turn to temps to keep costs down during a tepid recovery.
 
by Spencer Campbell

Debra Ann Jolley, 25, didn’t get one of those useless college degrees — such as in Swahili — but she still couldn’t find work in public relations and marketing, her major. “Not only was it right when the economy was coming back from the recession, all of my internships had been sales-based.” After graduating from Appalachian State University and moving to Charlotte in 2010, the Destin, Fla., native cycled through a number of jobs, including working in direct sales and for the local board of elections, until turning to a staffing agency about two years ago. “It was easier to have them looking than me.” Through it, she landed a position in the Queen City office of Detroit-based Quicken Loans Inc. Processing mortgages wasn’t her dream gig, but it was temporary.

North Carolina’s unemployment rate dipped to 6.7% in January, the lowest it has been in more than five years. It has fallen a staggering 2.1 percentage points since Gov. Pat McCrory took office in January 2013. “The trend of more people getting back to work in North Carolina is great news for our state,” he said in late January. “We continue to see that our pro-growth and pro-jobs policies enacted over the last year are having a positive impact and getting people into jobs.”

One such policy has received much attention — and scrutiny — in recent months. In July 2013, Republican lawmakers cut the maximum weekly payout for unemployment insurance from $500 to $350 and duration from 26 to 20 weeks. The overhaul was necessary, conservatives say, because the state needed to pay back the more than $2 billion it borrowed from the federal government to cover unemployment benefits during the recession. It also made North Carolina an interesting case study when federal benefits for the long-term unemployed ran out at the end of last year.

That inspection revealed caws in the governor’s crowing. “The reason the rate has gone down year over year, from December 2012 to December 2013, is because the labor force has gotten smaller, not because more people are reporting themselves as being employed,” says John Quinterno, principal of South by North Strategies Ltd., an economic- and social-policy research consultancy in Durham. “I’m not making a policy statement there, I’m not making a statement about causality. All I’m saying is, to get the numbers to add up the way they’ve added up the last six months of 2013, that’s what’s making it happen.” North Carolina’s labor-force participation rate — those working and looking for work as a percentage of the working-age population — hit a 37-year low in October.

However, many did begin hunting any steady paycheck when benefits stopped. “When we post a clerical position, especially those positions that have limited skills, we just are flooded,” David Burleson, superintendent of the Avery County school system, told The Wall Street Journal. That’s good news for staffing agencies. “We’re seeing a spike in our usage,” says David Lewis, vice president of franchising for Oklahoma City-based Express Services Inc., No. 17 on Business North Carolina’s annual ranking of the largest private-sector employers (“Pain and Gain,” February) in the state. “Companies are turning to us more.” Express had 10,301 job placements in North Carolina last year, a 64% increase over 2010. Before the unemployment-insurance overhaul, the benefits, when packaged with other social programs, permitted people to pass on entry-level or low-paying jobs. That wasn’t the case after July. “Short story is, yes, you cap unemployment benefits, and magically more people go to work.”

The bump following the unemployment-insurance overhaul is just the latest boon for staffing companies. A jump in temporary hiring is usually a good thing following a recession — a harbinger of full-time job growth as employers consider hiring. That hasn’t been the case in recent years. “We’ve had the same net rate of average job growth in North Carolina every year since 2010,” Quinterno says. “It’s varied a little bit from one year to the next, but essentially we’ve been in the exact same place for four years.” That’s because employers are increasingly viewing labor as a variable rather than fixed expense. If, for example, a company has 100 employees, not all of them are producing at the same time. “What we say is, shrink your core staff to 80,” Lewis explains. “Then just use temps to handle variations of workload above your baseline.”

Employers simply are not ready to return their staffs to pre-recession sizes — including in human-resources departments. Troy, Mich.-based Kelly Services Inc. specializes in skilled labor, particularly engineers, that’s often difficult to find. Many of the companies that hire such people downsized during the recession and are desperate for recruiting and hiring services. “Like every company, they’ve learned to do more with less,” says Sheila Martin, the Morrisville-based vice president of North Carolina operations. “Many don’t have the H.R. departments they used to have or the recruiting teams they used to have. They just turn to us and say, ‘We need these people.’” 

Then there are the greater regulatory burdens that have cropped up since the financial crash of 2008. “We can pick on the Affordable Care Act, right? That seems to be the favorite whipping boy of everybody right now,” Lewis says. When businesses cross the 50-employee threshold, they must provide health benefits to all staffers. Express pays for benefits for all of its employees, who are effectively lent to its customers. “You’ve got companies that are incentivized not to grow, which is a big challenge. Turning to temporary workers to manage growth doesn’t cause a regulatory nightmare.”

The result of increased regulation and a shaky recovery is a fluid workforce. “It’s not an anomaly,” Quinterno says. “Contingent work has become a business strategy. Taking advantage of workers creates a cost advantage for employers.” The downside is that plug-and-play hiring often mismatches people with jobs. “If everyone takes jobs below their skill sets, that creates blockages. Efficiency breaks down. People are not going to places they can be best utilized. That’s the reason the labor market 
is not as efficient as it should be.” The blockages, he says, become more prevalent as staffing agencies place more workers. 

But sometimes things work out. It turns out Quicken is a good company to work for. It’s even paying for Jolley to get a master’s degree in corporate training. When she graduates from Northcentral University, an Arizona-based online college, early next year, she hopes there will be a job in that field for her with the mortgage lender. Unfortunately, it doesn’t appear anything will be open. “I’m probably going to have to look elsewhere.”