NEWS COVERAGE

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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S OCTOBER OUTLOOK

Houston, TX - October 30, 2007 - Steven Drexel, president and CEO of CORESTAFF Services, provides commentary to Gary Rosenberger's October monthly payrolls outlook posted on www.econoplay.com. EconoPlay relies exclusively on the experiences of business professionals like Drexel who are in the trenches of economic activity.

The following is the outlook for October.

Non-Farm Payrolls:
Recruiters Say October Jobs Flattened as Optimism over US Economy Ebbs

• Job Losses from Credit Crunch, Housing Woes Seen Accelerating
• Another “Measurable” Stumbling Block Spotted in California Wildfires
• 2007 Holiday Ramp Up Slower than Hoped For

Employment growth stalled in October on shaky credit markets and the housing slump – and a wrenching new twist from the California wildfires, which is having a “measurable” impact on jobs, staffing firm executives say.

The holiday ramp up, which had been progressing nicely through September, also took a not-so surprising stumble in October with retailers now expecting their big season to be something of a downer.

Most felt October was basically on par with a good September. The problem is that more was expected from October, when holiday prep work reaches its annual crescendo.

One source complained that when he looks at his own books, he sees no palpable change from September to October. “But as I look around, I’m more worried than I’ve been at any time in the last five years,” he said.

Labor markets remain tight – but employers are not giving in to demands for more pay to help defray the costs of fuel or rising mortgage payments.

“We have seen something of a flattening to September,” said Tom Bickes, CEO of EmployBridge in Atlanta, specializing in logistics, transportation, specialty manufacturing, finance and accounting, and high-end administration throughout the Sun Belt. “I’m still seeing some markets that are very strong but others that are getting kind of tight.”

His permanent placement was “a little stronger” in October than it was in September, a function possibly of tight labor markets and the continuing grab for higher skill sets. “Recruiting is still a challenge in skilled positions. So you hire these people rather than keep them on in a longer-term temp arrangement,” Bickes said.

But the temp side is in flux. “This is an interesting time. It’s not as orders-rich as it used to be, and we’re not very talent-rich either. Usually, you have at least one of those two things going for you. I’ve never seen this happen before,” he said.

With modest job orders on one side and an uninspiring talent pool on the other, wage pressures remain non-existent, even in the face of fuel and mortgage inflation, he said.

Bickes continues to see growth in his transportation business (his barometer for the holiday ramp up). But that’s getting much harder, with his sales department driving that growth, probably at some competitor’s expense. “Trucking is significantly affected by housing. The lack of new home construction is having a trickle-effect on all the products that go into a home from building materials to furniture and everything else,” he said.

A Hit from the Wildfires

Scott Leighton, controller at Helpmates Staffing Services in Irvine, California, is taking a hit from the wildfires sweeping through the state. “The winds died down and are shifting, but the smoke is unbearable. It’s not good for our business. We will take a hit from this,” he said.

So far, two of his branch offices shut down due to power failures. But the bigger issue is just going to work. “There are roadblocks that kept 10 of my people home,” he said. “When people can’t get to work, we don’t pay them and we don’t bill.”

Even before the fires struck, he sensed increased uncertainty among employers. His clients had been telling him to anticipate more orders. “But they just won’t tell me when,” he said. One big client, a toy retailer, promised that its holiday Internet business would generate a lot of volume of work but refuses to pull the trigger on temp hiring.

“We would have expected to start our seasonal pickup last week, but it didn’t materialize – and this week, we have those wildfires. We’re not getting the growth numbers we were expecting,” Leighton said. “I don’t know if it’s just a delay or a bad Christmas.”

Leighton sees no evidence of wage pressures yet, but sees no way to contain them either between exploding mortgage payments, extortive oil prices, and property losses from the fires. “At some point something is going to crack. You can’t keep beating up on people and expect nothing to happen,” he said.

In his mind, the fire story is only beginning. “The fires will give way to floods during the rainy season,” he said, noting natural disasters could enhance the economic slowdown ahead.

“September was better for us than July or August. We were encouraged by September. But October I would say is flat,” said Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide.

“Comparables to last year are getting a little easier. And sequentially, I’m glad to be holding. But I’m not seeing improvement from September,” he said.

Drexel is more “hopeful” than he was before the BLS corrected itself on August payrolls. That huge upward revision from negative into positive territory “took away some of the downside risk for a recession,” he believes.

But he’s not brimming with confidence either. “The subprime mortgage situation and the weakness in housing is uncharted territory. I’m not sure how it will play out. I don’t know how much more of that contagion will spread. My hope is that we’re over the hump and – even if we take a few more hits – we can start to recover,” he said.

His clients appear cautious and are delaying hiring decisions. “We’re not seeing a collapse, although we’re not seeing the growth that we had hoped for either,” he added. They’re wrestling over “whether to hire now or wait until January, wait for a perfect candidate, or wait to see if the economy tips up or tips down.”

Corestaff has branches in smoked out areas of California. “I think it’s going to be a one-time event that will have a similar effect on us as a hurricane in Florida or a snowstorm in New York,” Drexel said. “Ten percent of our sales are in Southern California. It won’t cripple us, but the impact will be measurable. People will go to work, but we won’t be taking new orders.”

The good news from my standpoint is that it’s not gotten any worse. We have not seen a dip. We’re about even to where September was,” said Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states. “Sure, I would have liked to have seen a little blip upwards. To me this means that in our industry, there are not enough new orders.”

That is an especially bad thing in his area of specialization, administrative/clerical, where turnover is high. “Technical categories can last for months, even years, but we need new orders every three weeks or we get cut short,” Sigrist said. “We’re light on orders basically. We weren’t expecting an increase in October as much as wishing for one. But we didn’t see it.”

The credit crisis doesn’t bother him as much as company profits – and the need to boost revenues at all costs, including reducing expenses, to make shareholders happy. “The only thing we see on the credit side is more bad publicity about the economy,” Sigrist noted.

“Right now, I don’t have strong feelings about whether or not we’ll see a recession. But if the rest of the year compares with September or October, I won’t be totally unhappy because at least we’ve leveled off and aren’t going down,” he said.

October “On Hold”

Allan Brown, president of Doherty Staffing Solutions in Minneapolis, has downgraded his prior expectations for seasonal employment growth. “We grew faster than anticipated in September, which was great, and I was expecting it to continue in October. But October just stayed there. We’re still up 27 percent from last year but flat with September. Usually we see more movement in October.”

Brown, too, has seen the reports about soft holiday expectations but continues to feel an offset from a consumer shift to Internet retail. One of his clients, a once-bankrupt catalog/Internet retailer, “is going gangbusters,” he said.

“October, overall, is shaping up to be a good month. But September was exceptional and we’re even with September. It feels like we ramped up early and then went on hold,” he said.

He is seeing a surprise upturn in permanent placement. “October might end up as our best month ever on perm. We’re not seeing a downtick in perm, which is odd. You would think it would have happened. Maybe companies have to use up budgets before year end,” Brown said.

Brown would have thought high gas prices would make temp workers reluctant to commute. “But I haven’t seen anything yet,” he said. “I’ve seen no wage demands from that either. Maybe that’s where it will affect retail.”

In Georgia, there are no signs of a “bulk” jobs slowdown even if its largest metropolis might soon shut down for lack of water.

“My last four to five weeks are my peak weeks of the year, and it’s held up very handily. Maybe it should slow down. I keep waiting for it. It just hasn’t happened yet,” said Steve Pennington, division president for Global Employment Solutions, stationed in Dalton, Georgia outside Atlanta.

Pennington sees nothing to suggest that temp staffing is a reverse indicator for the economy – or that employers rely more on temps in uncertain or down times. “Contingency staffing is the way business is done these days,” he said. “I see myself as a cataclysmic indicator. When the economy turns south, the first thing businesses do is layoff the temps.”

Only twice has he felt a “bulk shutdown” in job orders, November 1990 and September 2000, and he sees nothing now to suggest a third recessionary touchstone.

“Right now, I’m having a normal, even a better-than-normal October. My customers have not turned off the spigot – and if some customers are slowing down, it’s because it’s the end of their season,” he said.

Speaking of spigots, Atlanta is running out of water – and could be completely dry in three months. “It is certainly making people rethink how many more rings we can build outside the rings we already have. But it’s not affecting jobs yet because people won’t believe they’re out of water until they’re actually out of water,” Pennington said.

He sees manufacturing as mixed, rather than down, and feels Caterpillar painted an overly bleak picture last week. He points to one client that makes smaller versions of Caterpillar machinery – “and my people are working 12 hour shifts, six days a week at the plant.”

Even more telling is the carpet business. Dalton is in the “Carpet Capital” of the world – home to the largest carpet manufacturers in the nation. “The residential side is in the tank,” Pennington said. “My friends in the business tell me it’s the worst they’ve seen in 30 years.”

But backlogs for commercial floor coverings remain huge. “Carpet demand is basically 50/50 between commercial and residential – and within residential its 50/50 new home to replacement,” Pennington said. “It’s only the new home business that’s miserable.”

Commercial Construction Jobs Hold Strong

“The fourth quarter is already exploding. Companies are positioning themselves for the first quarter of ’08,” said Bill Stynetski, president of HardHatJobs in Dallas, specializing in commercial construction executive search.

“General contractors, mechanical and electrical engineers, and developers are busy and backlogged with commercial projects due to break ground in the next 90 to 120 days. There’s also interest in our campus recruiting program for the graduating class of 2008,” he said.

Daniel Conroy of Michael Latas & Associates, an executive search firm also specializing in commercial construction, agrees. “Not much has changed. General contractors and construction managers continue to boom, especially among the larger firms,” he said.

The big concern is availability of labor, and Conroy’s clients continue to upgrade staff when talent becomes available. Conroy also continues to see “a large number” of résumés flowing in from single-family residential builders.

Things also look solid in I/T despite widening fissures in financial services, said Darren Bakay, senior technical recruiting manager for Ajilon-Adecco in Manhattan.

One client famously just layed of 3,000 workers – but he expects only a small pinch from that. “It may affect some of our consultants that we have on billing. We might even lose some of them,” Bakay said. “The advantage is that there’ll be an influx of candidates we can place with our other banking clients.”

The blow will be soft because the client had been on a hiring freeze all summer anyway. “There was no new business coming from them for quite a number of months,” he said.

“My office as a whole did very well in October. We’re on pace to have the best month we had all year,” Bakay said. Most of his clients are still hiring, including several that just announced major earnings hits from bad investment decisions.

Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland, saw hiring activity “slightly improve” in two areas – government and finance. “Government growth was due to a new contract year kicking in and finance was due to a merger event,” he said.

Beyond “the whining chorus” of complaints about fuel prices and exploding mortgages, he sees no impact on wages yet. “Workers usually want more pay regardless of the economy.”

Ziman sees no evidence of government pump-priming ahead of elections. “This is government and it would take a long time for them to put something like that in place,” he quips.

Todd Palmer, CEO of Diversified Industrial Staffing in Detroit, sees good demand in his specific high-skill niches.

Yes, Detroit’s economy is in shambles – but he manages to “shake loose those orders” from folks not entrenched in the automotive world.

His secret is adjusting to Michigan’s changing economy. His average hourly pay rate is $15, where 12 months ago he was going after the $9 market with less success. “Where we are, we’re seeing huge candidate shortages,” Palmer added.

Jim Goodwin, Express Personnel Services franchisee in Tupelo, Mississippi, reported an above average month for job orders in October. “We are definitely up from last year and staying steady with September,” he said.

Goodwin saw strength in healthcare and banking, with manufacturing “underperforming.”

Employers are refusing to increase pay, to the consternation of contract employees – many of whom insist on more pay or a shorter commute to offset high fuel prices.

Companies are ramping up for the holiday season, and Goodwin sees little to suggest any uneasiness going forward other than a more “conservative” stance over direct hire.

Scott Schumacher, an Express franchisee in Seattle, said October followed on a successful September. “Overall, we are doing well in all industries,” he said.

High gas prices have played a role in wage demands for a few months now. “Associates have increased their pay requirements and are definitely not willing to drive as far,” he said, adding that some companies are giving in to the wage demands.

He also sees clients ramping up for the holiday season but thinks expectations are lower than they were last year.

The U.S. Department of Labor is scheduled to release employment data for October on Friday, Nov. 2 at 8:30 a.m. ET.

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