By John Byczkowski
The Cincinnati Enquirer

Tonya Kwiatkowski, local division director for Accountemps, says business has been better this year than last.

Daniel Dolan isn't certain what he's seeing, but he's hoping it's good news.

Dolan is a group vice president for Spherion, a nationwide temporary staffing company with 15 offices in his region of Southern Ohio and Northern Kentucky. The last two years have been awful for temporary employment agencies, as the country wallowed in recession and companies laid off thousands of workers.

But things seem to be getting better. Business in Dolan's district is up the last three months. More companies are calling him to provide temps, mostly for administrative and clerical work.

"Three months is not a trend to me, but it's a good sign from my perspective," he said. "We see hiccups on our scale all the time, ups and downs. It's a little too early to claim this is a trend, but I still think it's pretty positive."

Dolan and many others hope the rising use of temporary workers portends more hiring and a stronger recovery. Nationally, the number of people employed through temporary agencies has been rising for three months, since hitting a six-year low in April.

"We think the economy is improving," said Tonya Kwiatkowski, division director for Accountemps in Cincinnati. "Here in Cincinnati, we've noticed this year has been better than last year." She also noted conversions - temporary workers being hired for full-time work - are up from last year.

Employment by temporary agencies is a much-watched indicator of conditions in the general labor market. The rationale is that as the economy comes out of a recession, employers test the waters by hiring temps. If the economic recovery firms up, they'll add full-time workers, making the recovery even stronger.

"There may be some sense that the temp market is a precursor, certainly on the way up, for the overall labor market," said Ken Goldstein, an economist at the Conference Board, a nonprofit business research group in New York City.

The Federal Reserve Board is one fan of temp agencies as an economic indicator, interviewing agency operators as it compiles its periodic "beige book" report on regional conditions. The July beige book noted that manufacturers in the Cleveland District (which includes Cincinnati) were adding temp workers. Another temp agency contact in the Chicago District, however, told the Fed that business was down, saying, "Whatever is happening in the economy right now is not creating jobs."

In July, temporary help services employed almost 2.3 million workers, up about 120,000 since April, according to the Bureau of Labor Statistics. That's promising news for temp agencies. April was their worst month since 1997. Employment of temps peaked at more than 2.6 million in 2000, a time when these services couldn't find enough workers to meet demand.

Then came the bursting of the Internet bubble, the stock market crash, the recession and rising unemployment. Demand for temps weakened.

"The industry as a whole has struggled for the past couple of years, in line with the economy as a whole," Dolan said. "We've got companies that don't want to take their chances hiring because of their (weak) businesses, and companies that don't want to take a chance with any expenditures, for that matter."

Kwiatkowski said it appears companies locally are hiring temps for help on special projects.

"They've either laid people off, or people are leaving, and they're not replacing them," she said. Any new work that comes in the door finds companies short on staff. They add temps, she said, because they're not convinced there's enough work to justify hiring permanent full-time workers.

Other local temp agencies report increases in hiring, but those increases aren't coming across the board. At CBS Personnel Services in Cincinnati, demand is rising for administrative support, machinists, welders and warehouse workers, Tim Dowling, CBS's corporate director of recruiting, said.

Demand is flat in other areas where the company supplies workers, such as health care and transportation. "I think all employers are being very cautious on how much they'll spend," Dowling said.

Robert Half Technology in Cincinnati provides temps for high-tech jobs, from technical support to programmers. Cincinnati branch manager Jason Skidmore said demand for workers is up compared to a year ago, primarily from companies in financial services and health care. But, he added, the jobs are very much temporary. Not many are being converted to full time.

Kim Arn of Manpower Inc.'s Cincinnati office said business is up 30 percent from a year ago, mostly in light industrial work and in call centers. "We're not seeing a spike and a dip. We're seeing pretty steady growth," he said.

Goldstein, the economist who oversees the Conference Board's indexes of leading economic indicators and consumer confidence, said the rising use of temps is a good thing, but it's only one indicator.

"Any hiring is a good sign," he said. Another positive for labor is that the number of new unemployment claims is dropping.

On the negative side, Goldstein noted that the length of the average workweek has dropped, indicating that employers are cutting overtime. And, new orders for capital goods and consumer goods fell in July.

"If we're right that this improvement in the economy is going to continue into the fall, those are the components that have to pop soon," he said.

The labor market outlook is still foggy. The number of jobs is rising in some regions of the country, "but not enough and not widespread enough to lead me to think that in the next three or four months we're going to see a turnaround in the general labor market," Goldstein said.

"To look for a turnaround in the overall labor market before Thanksgiving is asking this economy to perform too much."

E-mail johnb@enquirer.com.