The temporary staffing industry, like the economy, has seen better days. Pick up a newspaper, and you're likely to see the phrases "high-tech shakeout," "pink slip parties," or "dot-bombs" in bold print. The gradual loosening of the employment market, due in part to the flood of refugees from shipwrecked Internet companies, has eroded the strength of the temp industry. More than 230 corporations serve as temporary employment agents to nearly 5 percent of the U.S. labor market - and those jobs are the first to go in bad times and the first to resurface in good times.

The first to benefit from growth, and suffer from slowing
Help supply services (the economics term for temporary work agencies) have been around for more than 50 years. In the 1990s, a flurry of economic activity, buoyed by the information revolution, set the stage for thousands of workers to become "free agents" across the entire labor market. Since 1992, the industry has seen a steady increase in revenue and participation, and has been credited with helping to strengthen the U.S. economy through heightened productivity and labor market competition.

After a decade of posting positive growth numbers, the industry reported negative figures in the fourth quarter of 2000, when it suffered a 2 percent cut according to the American Staffing Agency. Strongly connected to the manufacturing and services industries, the temp industry feels the first rumblings of economic upheaval. One third of temporary workers are employed as operators, fabricators, or laborers, making them the first forced into the streets when large production companies start cutting back. Another third of the temp industry is committed to administrative tasks, the first to go when corporations start tightening their belts.

Companies take advantage of the flexible nature of their temporary work force, letting them go in initial cuts and hiring back when needed. Since temp workers aren't granted benefits (much less severance), it's cheaper for the contracting company to hire and fire temp workers at will. After all, that's one of the corporate "benefits" of using a temp work force - which translates into total job insecurity for the worker.

Employers can hide temp layoffs
When the economy takes a downturn, jobs are at a premium for everyone. When corporations announce layoffs, however, down-and-out temporary workers may not get the media attention of their more permanent counterparts. Compaq Computer Corp., for example, recently cut 5,000 traditional workers from its payroll. During a press conference, the spokesperson didn't mention cuts to the temporary work force - until asked. It turns out that an additional 10 to 15 percent of its 24,500-strong contingency force also got the ax. When asked to comment, the spokesperson cited typical business fluctuations, drawing upon the nature of the contingency industry.

A similar situation played out at Dell Computer Corporation. In February, Dell announced a 1,700 cut to its work force - neglecting to mention that the company had let go most of the temporary workforce the month before.

Temps help companies weather the storm
Companies can get a little overzealous with job cuts. Employees perform essential tasks, and when companies go through cutbacks, those tasks usually still need to be completed. So, what's the answer? Hire temps. "The economic slowdown has positive and negative effects that balance each other out," said Greg Booth, CEO of Net-temps, an online recruiting agency. "If a company downsizes, often they will find out in a month or two that they still need to get certain jobs done, so they add on contract workers."

A temporary worker signs on for a job fully aware of the contingency of his or her employment. Staffing agencies are not legally required to find work for temps - they only act as a mediator between potential employees and client companies, creating a group of job seekers in a constant state of flux. However, the industry was created to help companies weather economic ups and downs, matching up a relative workforce with a relative economy. Temps may be first to get the ax, but they're also the first to get rehired. That's the nature of the game.

- Regina Robo, Salary.com News Editor