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April 26, 1992, Sunday, Late Edition - Final

SECTION: Section 3; Page 10; Column 1; Financial Desk

LENGTH: 1661 words

HEADLINE: All About/Temporary Workers;
Filling the Gaps in the Post-Recession Work Force

BYLINE: By JUDITH BERCK; Judith Berck is a freelance writer and author of "No Place to Be: Voices of Homeless Children."

BODY:
Stock prices, housing starts and possibly even sunspots are leading economic indicators. But some analysts suggest watching the temporary services industry to get an even better jump on the news.

Trends in the employment of temporary workers presage shifts in general employment. Temporaries are the first to go in an economic contraction as workloads dwindle. "Then, if the work activity continues to drop, layoffs of permanent employees start," said Bruce Steinberg, spokesman for the National Association of Temporary Services, a 1,000-member industry group. When work begins to pick up, many companies test the waters with temporaries before plunging into permanent hires.

If that pattern is valid, good times may soon be here again. According to the association, the temporary-help industry began turning around in the fourth quarter of 1991, after falling into a slump in 1989. The association said 13 percent more people were employed as temporaries in the fourth quarter of 1991 than at the beginning of the year.

While 1991 will still post a decline overall, the fourth-quarter upturn is significant since traditionally the end of the year shows a decline. "The demand by firms like small-item manufacturers just mushroomed after the summer of 1991 -- I mean in excess of 20 percent over the prior year," said Mitchell Fromstein, chief executive of Manpower Inc., in Milwaukee, Wis., the largest company in the temporary-help business.

The South and Midwest have been making the strongest comebacks. In New York City, where the big temp users are financial companies and law firms, the phones started ringing again a few months later than elsewhere around the country. "It's been since December that we felt sure about a pickup," says Stephanie Messina, a branch manager in New York of Solo Word Processing, a temporary-help company in New York. "I'm sending out temps now who hadn't worked for me in two or three years."

At Goldman Sachs, the investment firm, increased usage of clerical temps has paralleled the fall and rise of business activity. "Since 1987, our usage of temporaries decreased approximately 10 percent a year," said Donna Cappella, vice president of personnel. "At the end of 1990, it started creeping back up again, and now I'd say we're almost where we were in 1987."

The Big Three
Manpower, Kelly And Olsten Lead

The temporary services industry supplies workers like typists, word processors or light-industry assemblers to companies on a short-term basis, often at a moment's notice, to handle special projects, work overload and worker absences. It is dominated by a trio of behemoths with widely varying business operations. Manpower is not only the biggest but also the most international. It had revenues of $3.5 billion last year, about half of that coming from abroad. Manpower has both company-owned and franchised offices in the United States

Kelly Services Inc., the No. 2, company, had sales last year of $1.4 billion, all from company-owned offices, predominantly in the United States. The Olsten Corporation, No. 3, had $838 million in sales last year from a mix of company-owned and franchised offices in the United States and Canada. These companies compete with hundreds of mom-and-pop operations with thousands of offices around the country.

Last year, about 6 million people worked as temps, with about 1 million employed at any one time. Temporary workers earned about $10 billion in the United States, according to Mr. Steinberg of the temporary services association.

Highly skilled workers, like computer progammers, can do quite well temping. They are paid an average of $23.40 an hour, according to the association. Word processors earn about $10.55 while unskilled workers, like security guards, are paid about $6.05 an hour. Generally, temps are not covered by company health plans or by unemployment insurance. On top of the temps' hourly pay, a client must pay a markup of 25 percent to 35 percent as a fee for the service.

A Limited Upturn
No One Is Fooling About Cost Controls

At temporary services companies, the atmosphere before the recession had been like that for a taxi dispatcher on a rainy night; the phones were ringing at all hours.

Then came the big slowdown in work orders. Some corporations put a freeze on using temps altogether. Many small temporary services companies were forced to close their doors or were acquired by larger companies. Large firms with several offices in one market consolidated their operations.

Even as available work was dwindling, more people were applying to become temps.

"Many more people now are temporaries not by choice, but because they can't find another job." said Ms. Messina. "They never thought they'd be a temp in their whole life."

While corporations are calling temporary services companies more often these days, things have not returned to the pre-recession norm. Diane Boardman, for example, a dancer who had temped for over a decade, recently returned to temping after taking a permanent job for two years. "When I went back temping," he said, "it seemed a lot more low-key. There was much less going on. Even the lights seemed dimmer."

Before the recession, corporate practices regarding temporary workers were freewheeling; ordering a temp was an easy matter, cost was no object. Those days are over. Chastised by hard times, most corporations are exercising tight, centralized control over any spending on and usage of temps.

As a result, many corporations turn first to their own permanent employees when they need more help, even if it means paying overtime. "If an attorney needs somebody, we try to use a member of our floating staff, or we switch the secretaries around, depending upon whether their attorney is in that day," said John Neary, director of finance at Weil, Gotshal & Manges, a law firm in New York.

At Merrill Lynch, Pierce, Fenner & Smith Inc., cost-control measures include a new rule that employees cannot hire a temporary worker for less than a week, or more than 90 days, said company spokesman James Wiggins. "In 1991, our use of temporary employment was actually down 46 percent from 1990. We are hoping to maintain that level of usage in 1992," Mr. Wiggins said. Some companies have done away with outside temporaries altogether and formed their own in-house departments.

And Lower Pay
The Point Is Just To Keep a Job

But use of temporary workers is going up despite policy and procedural changes at some corporations. According to the National Association of Temporary Services, in-house departments will never replace outside temps. "When a company takes it in-house," said Mr. Steinberg, "they discover there are many hidden costs -- you need a dedicated person, you need office space. It takes concentration away from the core business."

Pressure to maintain the bottom line, though, has pushed down the hourly markups charged by some temporary services companies, as well as hourly rates for temps. "Companies have learned they can say to a certain point, 'We're only going to pay this much for a temp,' " said Nadine Berkowitz, regional vice president of Solo Word Processing.

"There's a lot of undercutting by temporary companies trying to hold on to their business," Ms. Berkowitz said. At the same time, many temps are willing to accept lower hourly rates. "The temp with mortgage payments feels that a smaller paycheck is better than none at all," said Ms. Berkowitz.

KELLY CLIMBS FROM THE '91 GLOOM

After a depressing 1991, Kelly Services, the nation's second-largest temporary services company, which is based in Troy, Mich., is beginning to feel a decided quickening in the economy's pulse.

Kelly, founded in 1946, made its name by supplying short-term clerical help -- the "Kelly Girls," although never so named by the company. Nowadays, word processing temps and workers for light industrial slots as well as and technical areas, like computer programming, have joined the clerical force.

Kelly's clients range from megacorporations to mom-and-pop stores. The company owns and operates more than 950 branch offices, with 150 of them outside the United States, and places some 550,000 temporary employees annually from those offices.

Temporary services had been a growth industry, and Kelly, a leader in it. Sales increased at the company from $369 million in 1979 to $1.38 billion in 1989. Net earnings grew from $15 million to $71 million in the same period, and Kelly doubled the number of its offices.

Then the recession hit. After seven consecutive years of steady sales and earnings growth, 1991 earnings dropped 46 percent, to just $38.6 million. Revenues, which had topped $1.47 billion in 1990, eased back to $1.4 billion.

But the clouds have been lifting lately. Kelly began to have an increase in work volume starting in the third quarter of 1991. "When business turns up, companies initially try to get more output per worker, because to some degree they may have been underutilized during the recession." said Richard D. Rippe, Chief Economist at Prudential Securities, Inc.

The next step is to hire temps, then permanent workers after an expansion sets in. For Kelly, the pickup began first in smaller cities with populations between 100,000 and 1 million, such as Jacksonville, Fla.; Salt Lake City and San Antonio, Tex. Work volume at Kelly's offices in the larger cities started to rise in the fourth quarter, the company said.

There is a big difference, however, between the pickup seen lately and the activity which followed prior recessions.

"You can't mirror this to when we started coming out of the recession of 1981-82," said Carolyn Fryar, a Kelly senior vice president. "When we started coming out of that at the end of 1982 and early 1983, we were just booming, with incredible revenue increases. I don't think we're going to repeat what happened then."

GRAPHIC: Photo: Nadine Berkowitz of Solo Word Processing, standing, left. The take is down for companies and temps alike. (Fred R. Conrad/The New York Times)

Graph: "A Light at the End of the Tunnel?" tracks average number of temporary daily employees, 1sr qtr 1990-4th qtr 1991 (Source: Association of Temporary Services)

Table: "The Going Rate," lists estimated hourly wages for temporary workers in 1991, by job category (Source: National Association of Temporary Services)

LANGUAGE: ENGLISH

LOAD-DATE: April 26, 1992