MarketStance Economist Corner: Commercial Insurance Implications of the Employment Report for February 2010

The just released employment data for February contain some good news and some notes of caution for writers of workers comp coverage. First, the good news. While the economy continues to lose jobs, the pace has slowed substantially and several key sectors show signs of stabilizing at long last. In particular, both the mining and manufacturing sectors, which together account for some 20% of workers comp premiums, have reported stable employment since the beginning of the year.

Now, the cautionary implications. The temporary employment services industry, which includes PEO’s and other labor supply businesses, has shown an appreciable uptick in employment since the beginning of the year. In its own right, this growth is obviously a positive development. For workers comp writers, however, this trend signals a renewed challenge to underwriting profitability to the extent that carriers continue to experience difficulty in getting appropriate premium rates for these temporary workers.