At the very least, it was (or should have been) very clear to everybody that the future was uncertain. Permanently hiring people is a thing you do when you're certain.
Why did they not hire on time-limited contracts until they could be more sure of how things would shake out? If it turned out that the growth was permanent, you offer permanent jobs to the contractors. If it turned out it was temporary, you haven't made a promise to anyone that you could keep.
There are very few certainties in business. In the US, it's generally not even legal to just hire everyone as a contractor--and many people wouldn't even take a 12-month contract job, perhaps with no benefits.
Why did they not hire on time-limited contracts until they could be more sure of how things would shake out? If it turned out that the growth was permanent, you offer permanent jobs to the contractors. If it turned out it was temporary, you haven't made a promise to anyone that you could keep.
Either way, nobody gets burned.