Based on the dual labor market theory, fixed-term contracts (FTCs) were analyzed to test the following. Firms in the manufacturing sector in Egypt use FTCs to adjust the level of employment to the profit maximizing level in case of demand changes. The hypothesis was not supported by the results of econometric analyses with a firm-level data set from the World Bank Enterprise Surveys. The probit and the Tobit models were used to estimate the probability and intensity of different kinds of numerical labor market flexibility. Empirical results revealed that demand changes had no effects on using FTCs in the manufacturing firms in Egypt.