24/7 Wall St.

Toyota (TM) and Nissan, two of the most successful car companies in the world, are hiring temporary workers in Europe to staff some of their auto plants. It is safe to assume that these “employees” will not get significant benefits or pensions. Once they leave the factories, they will be no better off financially beyond what short-term employment has done for them.

Temp workers are becoming a larger and larger part of the workforce that sits half-way between full-time long-term workers and the unemployment line. The increase in their ranks is not necessary a good omen for the overall economy.

Temp workers are obviously likely to be out of work after short stints in offices or factories. That make them unlikely to be spenders. Their uncertain futures also makes them credit risks for banks and mortgage lenders. While their presence may make unemployment numbers seem less bleak, they actually may only represent a delay in rising joblessness. Another big bump in the economy will throw many of these people out of their jobs and the effect on unemployment statistics will push jobless rates higher, perhaps very suddenly.

Temp workers are a good stopgap for companies that cannot afford to pay full-time workers. Cheap labor may be all that stands between an enterprise’s profits and big losses. The shift in the labor market promotes the illusion that earnings may be rising and that those rising earnings are sustainable. That is only true if millions of Americans change their work status to being the equivalent of “full-time” temps.

The temp worker phenomenon could change the US economy profoundly and permanently. Temp workers are more likely to need government services like food stamps and underwritten medical care. Their transience could help keep housing demand low. These people will never be significant consumers and their access to credit will always be compromised, making them a sort of “black market” in workers who live on the edges of the economy.

Douglas A. McIntyre