Staffing companies' stocks rise
By Jane M. Von Bergen
Knight Ridder News Service
PHILADELPHIA — Any investment is a bet on the future, most often of a company's sales and profits. But investors in staffing-company stocks have a broader bet: on the future of the nation's overall economy.
"What you are seeing is that people that believe that the economy is improving are buying" employment-company stocks, said Jeffrey A. Joerres, chairman of Manpower Inc., the Milwaukee temporary-help giant. "And the people that don't are selling."
A growing economy makes staffing stocks popular because there is more need for worker-placement services, from temporary staffing to recruitment help. The opposite is true when the economy stalls, as it did in 2000.
Based on current economic conditions, "there's a little bit more selling than buying right now," Joerres said.
Of course, the industry also is affected by long-term hiring trends, which have shifted markedly in the last 10 years. For example, many companies now hire professional-level employees on a temporary basis.
This year, prices of staffing-companies' stock have been volatile. In March and April, prices of stocks such as Manpower, CDI Inc., Korn/Ferry International Inc. and Monster.com increased steadily, fueled by optimism that the recovering economy was solid enough to prompt hiring.
The economy added an encouraging 353,000 jobs in March and 324,000 in April. But when the numbers for May came out early in June and showed barely 200,000 new jobs, share prices slid.
They fell further with later reports that showed job-creation slowed to 78,000 in June and 32,000 in July.
In late August, after hitting lows at the beginning of the month, these stocks rebounded a bit in anticipation of the August jobs report from the Bureau of Labor Statistics. On Sept. 3, the bureau said the economy had added 144,000 jobs, and it revised the July number to 73,000 new jobs. The news lifted share prices more. And on Oct. 8, 96,000 new jobs in September were reported, and August was revised to 128,000.
"The employment recovery might have stalled a bit, but directionally it's positive. Employers are feeling better and they are going to start to hire," said James Janesky, an analyst in the Philadelphia office of Ryan Beck & Co., a Livingston, N.J., investment firm.
Given the industry's ties to the broader economy, what's the best strategy for an investor?
"The ideal time to invest is six months ahead of the economic recovery, and sell six months before" the economy heads into a recession, Janesky said.
"If you catch it any time before the peak, you can make money," he said, suggesting that investors look for generally positive economic trends such as improving job-creation numbers, the growth of capital spending and increases in the gross domestic product, before making their buys.
"It's a good way to play the early part of an economic recovery, because before employers get serious, they bring in temps — just in case the recovery is a fake-out," said William Sutherland, director of equity research at Boenning & Scattergood Inc., a West Conshohocken, Pa., investment securities firm.
Whatever the recent Department of Labor numbers, people in the staffing business are optimistic.
Paul Hawkinson, publisher of the Fordyce Letter, a St. Louis newsletter for the recruiting industry, said recruiting companies will get more work in the long run as employers replace retiring baby boomers.
In the nearer future, Hawkinson cited surveys predicting an impending churn in the job market.
"As soon as the rebound becomes firmly engaged, 40 to 50 percent of the professionals are going to be looking for another job, because they feel they've been mistreated," he said. "After suffering three years in the trenches, they think the grass will be greener elsewhere."
Joerres said clients are telling him they plan to hire, but at a measured pace.
That's also what David Shabot hears. Shabot is managing director of the Philadelphia office of Korn/Ferry, an executive search firm based in Los Angeles.
What encourages him is increased demand for executives among many sectors, not just healthcare, which has been steady.
"I'm seeing more breadth," Shabot said. "If they're hiring the senior people, they have to hire people down below."
