NEWS COVERAGE
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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S NOVEMBER OUTLOOK
Houston, TX - December 11, 2007 - Steven Drexel, president and CEO of CORESTAFF Services, provides commentary to Gary Rosenberger's November 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 November.
Non-Farm Payrolls:
Recruiters Report a November Pickup as Seasonal Demand Beats Expectations
- Businesses Scared, But Need Is There, So They Hire; Wages Bump Higher
- A Cloud Over Financial Services, Which Joins Slowdown in Housing and Autos
- Christmas Economy Provides an Unexpected Boost
By Gary Rosenberger
NEW YORK (EconoPlay) Nov. 30 – Businesses picked up their pace of hiring in November in response to a Christmas economy that’s outperforming low expectations, offering temporary refuge against spreading fears about a looming housing-led recession, staffing executives say.
Businesses are still scared about the future – and that uncertainty might be giving a bump to providers of temporary labor. But the high volume of job orders, and burgeoning upward wage pressures, suggest there is need for incremental seasonal labor.
Labor shortages are also continuing to fuel permanent hiring for higher skill sets – with increased job jumping reported in commercial construction trades and other holdovers of the economic boom.
At the same time, a cloud has settled over financial services, which now joins the slowdown in automotive and housing.
The staffing industry greeted BLS’s preliminary estimate of 166,000 jobs for October with slightly less disbelief than it did the 4,000 job losses originally reported last August (later revised to plus 93,000). Most expect a big downward revision in keeping with their own take on reality – but discounting for one-shot events like the labor strikes in Hollywood and Broadway, they feel November was at least the equal of October.
The apparent strength of the Christmas economy was a source of delight and relief for those anticipating collateral damage from energy prices and the belching housing market, but left others to wonder if Americans are on a final spending spree before being hauled off to debtors’ prison.
“We’re seeing higher growth rates because we have easier fourth quarter comps. But we’re also seeing sequential growth rates. We had the highest revenue week in the history of our company two weeks ago,” said Shawn Poole, CFO of EmployBridge in Atlanta, specializing in logistics, transportation, specialty manufacturing, finance and accounting, and high-end administration throughout the Sun Belt.
Consequently, he feels “somewhat encouraged” by the economy.
“I think it’s a mixed bag out there. My clients are worried about business and that might cause them to use temporary workers,” Poole said. “On the flip side, their businesses are strong enough that they’re using pretty good volumes from us. There’s clearly a need for incremental, seasonal labor.”
Not surprisingly, “automotive remains soft for us,” Poole said. “We’re also seeing softening in places like Florida and Arizona, where the housing downturn is most extreme.”
But all other places looked good in November. “We’re seeing the normal seasonal pattern that we didn’t see last year,” he said. “The seasonal growth patterns that we’re seeing are identical to what we saw from 2002 to 2005. That wasn’t the pattern we saw last year or in 2001 with 9/11 and the recession.”
Wages “are pretty strong,” Poole added. “Our clients are struggling to find skilled labor and are willing to pay more for it.” His “anecdotal indicators” show productivity to be up, which lessens the risk of an inflationary push from wages.
Poole had expected October payrolls to be well below 166,000 – but in retrospect he wouldn’t be surprised to see that number hold in light of the fact that “166,000 wouldn’t have excited anyone when the economy was more robust.”
Santa Saves November
“Business is good right now. For us it’s mostly Christmas-related shipping activity. Logistics is where we’re picking up some volume and where we’re double digits above last year,” said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California.
“It feels like we’ll have a good November and a good beginning to December,” he added. “It’s surprising to me. Housing stinks. They’re tightening up on credit. Where is the spending coming from? I haven’t figured it out. Maybe it’s the last spending spree before it all tanks.”
Nevertheless, he did spot flat demand for clerical workers – secretaries, accountants and the like – coming from the corporate parks that dot the Orange County landscape.
He is skeptical about October’s payrolls report. “It had no relationship to reality,” Leighton stated. “In October we didn’t see the pickup we usually see. We had those wildfires, too.”
But those wildfires now feel like a blip on the radar. “The uptick we didn’t get in October did come in November. And right now I’m feeling good. Call me next week and I might be hurting again. It’s all so day to day,” Leighton said.
Allan Brown, president of Doherty Staffing Solutions in Minneapolis, saw November flat with October. “Our October was strong. It’s just that our September was even stronger,” he said.
His order activity, which is heavily weighted in light industrial, was essentially flat for the last three months but up about “20 plus percent” over last year.
“What is interesting about November is that we’re seeing record permanent placement fees and our one Internet retailer is having a banner year,” Brown said.
He is not certain why permanent hiring would be so strong, but surmises that it’s a function of worker shortages, particularly for engineers and anything related to quality control – which, he says, may or may not be related to the China product recalls.
Jobs Flat, Wages Are Up
“I keep getting weekly reports that look exactly the same as last week’s reports,” said Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide. “I know there’s movement beneath the surface, but at the top it comes out flat and it gives an impression of not moving.”
While the sequential progression is flat, “it looks a little better when the comparison is year over year,” Drexel added.
“My Christmas economy clients are perking up,” he said. “I live close to the Galleria in Houston and I can’t get home at night because I can’t drive past the mall traffic. It’s the industrial and manufacturing clients that are falling off a little bit for us.”
The energy sector is another boon to his balance sheets. “That’s been helpful for us, particularly because we’re here in Houston. Maybe that’s the reason I can’t get past that mall parking lot,” he said.
But orders from manufacturers are decelerating earlier and more abruptly than normal. “If they took off eight days for Christmas last year, they’re taking 10 days off this year to work off some of their inventories,” Drexel said.
Companies associated with residential construction are a continuing downer, while hospitality strikes him as mixed. “People still go to gamble and party, so we’re very strong in Las Vegas. But we’re not doing as well in Miami, especially among the luxury hotels there,” he said.
“Wages are our saving grace,” he noted. “Wages are stronger now than they were in the middle of the year. We saw them soften in July and August and then they stiffened back up a little bit since. They’re improving across the board for us.”
Drexel was pleasantly surprised by the BLS’s October payrolls number. “It did sound high to me. On the other hand, I think for the confidence factor it’s always better for them to miss high than to miss low, as they did in August,” he noted.
Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states, also saw November as “very flat.”
“Nothing happened in November that was any different from October,” he said. But with 2008 bearing in quickly, he is thrilled that things are on an even keel as opposed to the down slope that economists have been predicting. “They also said everything is going to be terrible for Christmas this year, and so far it isn’t looking bad at all,” Sigrist said.
How Foreclosures Help Christmas
Greg Palmer, CEO of Palmer Consulting and the former CEO of Remedy Staffing, said his overall impression is that the job market is on “a kind of drift.”
“It’s not terrible. Labor is still tight in high-skill areas. Unemployment for people in professional categories is still only one or two percent,” he said. But among his clients the permanent placement side is looking “lumpy” these days. “A bunch of my guys are doing well and another bunch is not doing well,” he said.
“Anecdotally, I do hear that staffing companies are hiring a lot of mortgage brokers because their skills are transferable,” he added. “But the really big guys with their national clerical contracts are soft. A lot of that is their exposure to financial services and the big banks. When they announce those big layoffs, typically the temps are the first to go.”
He was puzzled by the 166,000 jobs number in October. “I didn’t hear it or see it. Nobody I know was ripping the cover off the ball in October,” he said.
Palmer does have an interesting take on why Christmas is outperforming expectations, arguing that there are positive consequences to the foreclosure crisis. “All those people who lost their homes are now renters and they’re paying a third in rent compared to what they paid on their mortgages. That really opens up their pocketbooks. There’s a lot more cash floating around because more people are renting,” he said.
Palmer sees no clear direction for the economy or the labor portion of it. “But it does feel to me like the small staffing guys are adding to their head count or maintaining head count – and it’s only the big guys who are laying off.”
Steve Pennington, division president for Global Employment Solutions, stationed in Dalton outside Atlanta, said his November is going to be “fantastic” – with much of his jump coming from two new clients with exposure to holiday retail. But with those clients wrested from the competition, “it’s a case of our gain being someone else’s loss,” he said.
Without them, Pennington would have had his normal November slowdown – down about 5% from October but up around 14% over last year.
He has not seen a significant wage move in his world of light industrial. “I haven’t heard any clients in huge distress over that subject,” he said. “All you have to look at is the contracts at GM, Ford and Chrysler where the unions gave up quite a lot. If you twist a wrench in this country, you’re in trouble.”
He is budgeting for “modest increases” in 2008. “That could just be a Georgia thing. On the other hand, I see no indication that this thing is falling apart,” he said. “If I have a soft fall the way I did in 1990 and 2000, it’s an ugly sign. That didn’t happen this year.”
It’s a different story in neighboring Florida, where there’s been talk “of the first jobs exodus in the history of the state,” Pennington said. “But I’m not worried about it. It will all come back in five years when all those baby boomers retire.”
Commercial construction hiring continues to act as buffer to the slumping residential economy but with some fraying at the edges, said Daniel Conroy of Michael Latas & Associates, an executive search firm specializing in commercial construction in St. Louis.
“I see some slowdown in retail construction, but only in certain areas,” he said. He also sees some lightening in under-$100 million projects in the Northeast, Mid-Atlantic, Upper Midwest and West Coast.
“Other sectors seem strong” – and Conroy sees no reason why commercial construction shouldn’t stay strong through 2009. “It’s been hot and all indicators are that it will remain positive from what I can see in my little peanut gallery,” he said.
Wages, on the other hand, are on the rise and job jumping is more rife “than ever before,” especially among younger professionals. “Wage pressures as they would relate to managers continue to accelerate at some ridiculous numbers,” he said. “Estimators today in metropolitan areas, for example, are compensated generally 10 to 20 percent higher than even a year ago. If they’re not, they’re gone!”
Bill Stynetski, president of HardHatJobs in Dallas, also in commercial construction, sees increasing demand for project managers, project executives and program managers with no talk about the credit crunch filtering into commercial construction.
He continues to see resumes coming from those formerly employed in residential housing, with overall hiring activity up from October. “We expect December to be just as strong for project management positions.”
Tim Dillard, Express Personnel Services franchisee in Jackson, Mississippi, reported “a pretty strong month as far as fourth quarter sales go” with orders up in industrial and manufacturing. Wages have moved in lockstep with the minimum wage, but some of his “quality” workers have been granted “dramatic” increases.
“We are doing well in our market, and I know there is all this talk about recession. To be honest, we feel great about 2008 and are predicting our sales to double,” Dillard said.
“I would say we’re on par with October, and this quarter is much stronger than the previous quarter,” said John Roller, Express Personnel Services franchisee in Manchester, New Hampshire. “Our office services have picked up dramatically. Manufacturing was again our strongest performer, while distribution and call centers underperformed.”
Last year’s holiday season “was great” and this year’s is looking “even better,” Roller added. He notes that some of his clients have volunteered wage increases before hearing any such demands from workers.
Mixed Views on Financial Services
“I know it’s not the answer you’re expecting, but we’re not seeing any fallout in financial services,” said an executive for a national professional staffing firm. “My sense is that project work done by contract workers has not slowed or gone away. Obviously, that’s not the case if you worked for a Mickey Mouse mortgage company that disappeared, or even one of the giant banks that’s in danger of disappearing.”
He acknowledges that there could be a big lag factor that he’s not aware of yet, “but as a practical matter our rates with financial clients have maintained,” he said. “Right now business is fine. But we are in a plane and the radar screen shows bad clouds ahead. The big question is, are you going to bounce a lot or are you going to invert?”
“On my end, it’s slow in our office right now,” said Darren Bakay, senior technical recruiting manager for Ajilon-Adecco in Manhattan with clients in many of the big investment banks. “This is a time of year when people start holding back and wait for 2008 before doing anything.”
What’s worrisome is that there was no holding back a year ago. “Last year at this time, our office was busy because people had budgets to use or lose. This year, they don’t seem to care whether they use up their budgets or not,” Bakay said.
When heads are rolling at the very top of the pyramid, it puts a damper on hiring at all levels beneath, Bakay observed.
Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing, saw orders down about 25% from earlier months. But clients have told her to expect to “staff up” in early 2008.
Despite the current lull, wage pressures have been rising since the beginning of the year because “it’s hard to find certain skill sets,” Peterson said.
Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland, saw “steady” orders in federal government, regulatory agencies and financial services. “Not gangbusters, mind you, but steady.”
Ziman sees 2008 as a year of slow growth. “Our hiring managers are talking about scheduled work, and they anticipate temp and internal growth to meet the demand.” Ziman does not anticipate “any significant growth in wages for a while.”
Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York, said his global operations are outpacing his U.S. operations, which are on a moderating slope.
He has seen an increase in manufacturing executive recruitment from exporters, driven by the weaker dollar. But in banking and finance, “it’s a question of feast and famine,” Clarke said.
“Bonuses and employment in the bloated consumer credit and mortgage segments are being slashed. The banks that are hurting are beginning mass layoffs, starting with their CEOs. There is a slowdown in private equity hiring due to the credit crunch,” he said. “Fortunately, Boyden is more exposed to private wealth management and other segments where hiring remains brisk.”
The U.S. Department of Labor is scheduled to release employment data for November on Friday, Dec. 7 at 8:30 a.m. ET.
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CORESTAFF Services is one of the largest national staffing firms in America, with offices in 20 states. CORESTAFF also operates as TeleSec CORESTAFF in the Washington, DC area and Leafstone Staffing Services in the New York City metropolitan area. CORESTAFF is not affiliated with Core Staffing Services, Inc., which operates in the New York Metro Area. CORESTAFF is headquartered in Houston, Texas.
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