No doubt, the impact of the latest recession, which began in December, 2007, and is now all but officially over, has been severe. The massive layoffs that ensued stretched well into 2009 and spared no sector. According to the U.S. Department of Labor, 8.4 million jobs have been lost since the recession started. (The latest figure reflects an upward revision made recently by the government agency from a previous tally of 7.2 million.) The unemployment rate spiked to 10.1% last October, a level not seen since the early 1980s. Against this grim backdrop, business has certainly been tough for staffing companies over the past year or so. Kelly Services (KELYA), Robert Half International (RHI), and Manpower (MAN) are among those recruiters that have struggled.
But the news hasn’t been all gloom and doom. In fact, there have been some signs indicating that the economy is on the mend. For example, the U.S. gross domestic product jumped 5.7% in the final quarter of 2009, the fastest pace in six years. Surprisingly, the jobless rate also ebbed to 9.7% in January, 2010, offering staffers and jobseekers alike a glimmer of hope. Especially notable is the recent upswing in the hiring of temporary workers. The trend, which began last September, seems to suggest that better days are around the corner for the labor market. Indeed, increased temp hiring is typically a precursor of a recovery, as employers often ramp up part-time staff three to six months before adding workers to their payrolls on a permanent basis. Recruiters with temp-staffing capabilities have clearly been benefiting from the recent rise in demand for part-timers, including Robert Half International, which provides professional business recruitment services primarily within the fields of accounting/finance and technology. Likewise, Manpower, a global provider of non-government employment services, and Kelly Services, which offers job-placement services in clerical and light industrial areas, as well as in various professional and technical disciplines, have seen an uptick in temp staffing volume.
While the latest employment data seem encouraging, the jury is still out on whether the current trends are a signal of a sustainable job-market turnaround. With the recent recession badly crippling the economy, the road to recovery will likely be long and bumpy. For now, companies appear to be holding on to temps for longer periods than usual, without committing to take them on full time, and thus avoiding increased labor expenses. This may well persist until businesses gain greater confidence in the economy.
Essentially, what this means is that it may take a while before labor-market conditions normalize. Temp-to-hire and permanent-placement orders, which tend to fetch more money and yield higher margins than part-time assignments for staffing companies, probably won’t accelerate overnight. Indeed, the unemployment rate may well hover near 10% through the remainder of 2010, a level that is still high by historical standards and enough to make business (and profit growth) challenging in the months to come. For the time being, though, recruiters will likely have to settle for less-lucrative temp staffing assignments to help pad their bottom lines. In this tough environment, half a loaf may be better than none at all.