Southeastern Insights

Federal Reserve Bank of Atlanta    

March 2012

Labor markets ......
While there is growing optimism expressed among contacts, it is important to recognize that businesses are approaching expansion plans with caution. 

• For example, while many businesses are adding to payrolls, we continued to detect hesitancy on the part of firms to increase the size of their workforces.

• While they may be adding employees, temporary or contract hires continue to be favored by many firms as a means to address labor needs.

• More companies are hiring temporary or contract workers as part of a vetting process before adding them formally to their payroll. 

• Most smaller businesses appear to be looking to rebuild margins before moving to adjust their workforces. Businesses also continue to weigh carefully all decisions that increase costs. 

So, even though economic performance and the business outlook may be improving, that improvement may not immediately translate into additional hiring for most firms—at least in the short term.......

continued.......

By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department, and Shalini Patel, a senior economic research analyst.