A surprising drop in July temporary payrolls, part of a weaker-than-expected U.S. government jobs report, defies the trends staffing companies are seeing in their own businesses, say staffing execs, who predict slow, modest jobs growth will resume in coming months.

Temporary payrolls slipped last month after nine months of sequential growth, a surprise because that measure typically ticks higher from June to July. Temporary payrolls are a key measure of the health of the wider U.S. jobs market, as they are the normally the first to come back in a recovery and the first to suffer in a downturn.

That decline added a dissonant note to a now-ending earnings season in which employment services companies generally reported strong results and spoke with confidence about the balance of the year.

Overall, the U.S. economy lost 131,000 jobs outside the farm sector last month, the Labor Department said, double the decline that had been expected. The unemployment rate, based on a separate survey, held steady at 9.5 percent, as discouraged workers remained on the sidelines, not yet actively seeking jobs.

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Order flow for temporary workers was consistent week-to-week at staffing firm SFN Group Inc and the number of people out on assignment continues to grow, said SFN Chief Executive Roy Krause, who noted that the first few weeks of July were stronger than the end of June.

I don't think we're going to see big spurts of growth, but we don't see it falling back and we don't have any indications from our clients that way, Krause said. Our biz is extremely trendable. If the trends flattened, I'd start getting more worried than I am now.


Investors are worried, however.

Shares of nearly all U.S. staffing and jobs services firms were lower on Friday. Manpower Inc shares were down 2.7 percent. Robert Half International Inc fell 4 percent. SFN Group lost 1.8 percent, and Monster Worldwide Inc lost 3.9 percent, all on the New York Stock Exchange.

In trade on the Nasdaq, Hudson Highland Group Inc. fell 9.5 percent and Kelly Services Inc was down 4.4 percent, while in Zurich, shares of Adecco SA, the world's biggest staffing firm, fell 3.7 percent.

July's report was the second straight month of job losses, but those numbers should start showing gains again in coming months, said Tig Gilliam, chief executive of Adecco North America.

Our temp business continues to suggest that temp staffing is leading and that will take us to a faster pace of private sector permanent employment, Gilliam said.

The BLS number doesn't show the same pace or level of recovery, he added, referring to the Bureau of Labor Statistics. The temp number doesn't ring true.

The number of temporary workers going out each week is still growing, and at a faster pace, Gilliam said, but added that he could not disclose specific numbers ahead of next week's Adecco earnings report.


One reason why it is hard to draw solid conclusions about the direction of the economy is that the hiring and now the firing of U.S. Census workers distorts results.

Also, many key sectors of the economy, like financial services, typically ramp up recruitment in the autumn, after Labor Day, so the September and October BLS reports will be far better indicators of where hiring is headed, executives say.

One executive with an informed perspective on the financial sector is Scot Melland, the CEO of Dice Holdings Inc, which runs specialized career sites focused on technology and financial services.

In our sectors, we continue to see good recruiting activity and a slow, steady increase in recruiting activity in financial services and in tech, Melland said. I'd expect job growth in those areas to continue for the rest of the year.

The number of job postings on Dice's eFinancialcareers.com is up 31 percent from a year ago, while technology job postings on Dice.com are up 36 percent.

What we'll see in the next six months in the total labor market is slow private-sector jobs growth, below what people would expect in a normal recovery, but still positive, Melland added.

(Reporting by Nick Zieminski; Editing by Phil Berlowitz)