Few industries suffered in 2001 as much as staffing. The negative numbers are staggering — nationally, revenue for temp sales plummeted 15.4 percent and permanent placements declined 25 percent. That translates into an $11 billion decline in sales, reports the American Staffing Association in Alexandria, Va.

San Diego was not immune.

“Between June and July of last year, we saw our biggest downturn ever,” reports Debbie Dunn, regional manager for The Eastridge Group.

Then something unexpected happened in March, producing a glimmer of hope that economic recovery may be in sight.

“Our sector was up 10,000 jobs in February, then up 60,000 jobs in March and up 66,000 jobs in April,” says Richard Wahlquist, president and CEO of the ASA. “It was the largest sector increase across the board and, perhaps, the beginning of an economic recovery.”

The staffing industry always has been a leading economic indicator, with hiring trends hitting it about six months before other sectors. The National Association for Business Economics says the U.S. economy likely will see a growth of 3.5 percent through the end of 2003. The U.S. Bureau of Labor Statistics projects that between 2000 and 2010, temporary staffing will be the fifth fastest growing employment sector by creating 1.9 million new jobs.

San Diego may be one of the first California cities to feel the upswing. The county’s joblessness rate dropped from 3.9 percent in March to 3.8 in April. While the region’s unemployment rate dipped as low as 2.7 percent last year, San Diego is still in better shape than the national rate of 6 percent and of 6.4 percent for California.

San Diego staffing firms already are experiencing an increase in hires. The phone has once again started to ring, they report.

“We’re seeing that companies are definitely dusting themselves off from 2001,” points out Jeff Prekker, district manager of Yoh Scientific, a company that specializes in the biotech industry. “They’re not in a fever pitch hiring mode, but most of the companies we’re talking to expect by the second half of 2002 to be back to a steady hiring pace.”

Could this be the beginning of an economic recovery? Even if economists have trouble accurately predicting the next few quarters, they seem to be encouraged.

“I don’t want to be premature and say it’s all going to turn around,” says Eve Nasby, regional manager for Apple One Employment Services. “But the feeling is that the money was always out there and now people are relaxing a little more.”

As pundits examine the validity and lasting power of this upswing, it opens the discussion to a few other questions.

Why Now?

When companies cut staff and slowed manufacturing during 2001, production practically came to a standstill in some industries. But consumer confidence never bottomed out as expected. And now the supply doesn’t meet demand.

“The warehouses and shelves have become depleted and consumer orders are beginning to come in,” explains Phil Blair, executive officer of Manpower Staffing Services. “It’s very encouraging.”

Several industries, including light industrial, manufacturing and the steadily growing biotech sector, are seeing a rise in business. That means they need to bring in workers to replace those cut during the downturn.

Why Temps?

The trend bodes well for employment agencies.

“After the layoffs of two years ago, businesses are afraid to start hiring,” says Blair. “They also can’t ramp up their HR departments that fast. So they call for temps.”

Many advantages surround temporary workers at this stage of a tentative market. It’s a good way to bring on employees who know they are temporary, but also to give them a tryout for possible permanent placement. Another advantage is that the staffing company provides screening and recruiting.

“Employers also are timid about bringing in new bodies and giving them employee status with benefits,” says Lisa DeBenedittis, president of Elite Staffing Services Inc. “It’s easier to take on temporary employees.”

Temporary staffing allows companies flexibility should this upswing be a blip in the market.

Why Changes?

As a result of the economic downturn, both employer and employee expectations have changed. Within a short time frame, it’s gone from an employee’s market to an employer’s. During that time, both segments have learned

“I think employers are now more focused on retention,” says Nasby. “The one thing they’re taking away from all of this is the value of the employee.”

Employers also are looking for the loyal employee who can multi-task, says Dunn. “They have to be careful, in case the market softens again, to have the right people in place.”

Employees are eager to get back to work. Few are making higher salary and benefit demands, which were common a few short years ago. “They’re more flexible than they’ve been in the past,” says Dunn. After months of hearing there are no jobs, employees are happy once again to be going to work.

Will It Last?

“Two months does not a trend make,” notes Wahlquist. “There usually is a lag between the unemployment rate dropping and economic recovery.”

While staffing agencies are hoping this is just the beginning of a recovery, most are cautious. “It might not get all the way back to the way it was,” warns Prekker. “The heavy-duty investors have been stung by the dot-coms and they’re not going back to where they got bit. And people are cautious. From consumers up to investors, they’re not spending like they did.”

Still, if the staffing industry is indeed an economic indicator, then the future looks promising. “Six months ago, we were only replacing maternity leaves,” says Blair. “Now businesses are opening second shifts and third lines and going back to overtime. That’s why we think it will last.”

Mostly, agencies are hoping never to repeat the slump of 2001.

“Our business is always peaks and valleys,” adds DeBenedittis. “It’s looking good for us right now. It’s nice to swing in the other direction. All we can do is hope that it continues.”