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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S APRIL OUTLOOK

Houston, TX - April 27, 2007 - Steven Drexel, president and CEO of CORESTAFF Services, provides commentary to Gary Rosenberger's April 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 April outlook.

Non-Farm Payrolls:
Recruiters:  Jobs Momentum Rode into April Fortified
by Business Confidence

• Lowest-Tier Wages Rising on Tide of Minimum Wage Hikes in Key States
• Employers Willingly Pay Modest Increases to Attract Quality Workers
• Seasonal Demand Lifts Hiring, Including in Hard-Hit Motor State

By Gary Rosenberger

NEW YORK (EconoPlay) April 26 – The hiring momentum rolled into April as companies became emboldened by encouraging profit reports, the Dow’s advance and renewed confidence about the business climate – washing over any lingering anxieties on housing, staffing executives say.

Good weather energized seasonal hiring, including in economically-pressed Michigan, while record rainfall and flooding in the Northeast was seen as a minor inconvenience at worst.

Once again, the main obstacle in the way of monumental job growth was the tight labor pool – especially among the college-educated, where joblessness stands at below two percent – and it will be interesting to see what happens when this year’s graduating class is unleashed.

Employers appear more willing to cough up extra bucks to attract and retain needed help, and wage pressures remain on a firm upward footing.

Minimum wage increases in a number of large states are raising the tide for all workers earning less than $10 an hour or so. But some also report that wage increases for white-collar professionals are moderating from the spikes of the not-too-distant past.

The same recruiters who foresaw last month’s “unexpected” surge in non-farm payrolls now report, at the very least, no retreat.

An Upbeat Assessment

“It was another upbeat month. Things haven’t slowed at all. In fact, we’re booming,” said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California, providing industrial, high-end clerical and accounting staffing throughout southern California.

“I keep waiting for something bad to happen, but nothing ever does – and it turns my optimism knob on,” he said.

The new orders are broad-based, not hinging on any specific sector. “They seem to be driven by the difficulty all companies have in finding good people. If we find the help, we can place them,” Leighton said.

California’s minimum wage increase in January did nothing to scare away business. “We saw pay rates increase 7 percent in April over last year, and we’re able to increase our mark-up,” he said. “That’s driven by the fact that if you have the quality worker you’re in a stronger bargaining position.”

His first inkling into the resurgent job market occurred in January, but he saw that month’s gain all but vanish in February. However, “the last two months have been extraordinary,” Leighton said. “In March it came back 18 percent and all my worries went away. In April we’re up by the same amount.”

“I liked April. It was in some ways a carbon copy of March,” said Charles Sigrist, president of Stivers Temporary Personnel in Chicago, with branches in 12 states.

“The key difference was that in April we saw temp-to-perm and direct hire go way up. It was a little bit of a surprise. Temp stayed about the same as in March,” he added.

Sigrist counted a number of factors to support orders – good corporate earnings, the Dow at a new high, “and the weather was pretty good,” he said.

“Everyone was a little worried about where things were going,” he said. “Were we going to see a bit of a recession? Certainly, no one likes how the war is going. But the bottom line is companies seem to be doing well and life is good for most people.”

Wages Increased More than Expected

“I think the momentum continued in April,” said Steven Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide.

“We’re still doing well in technical, and professional is holding up. We saw a pickup in industrial. Only clerical is soft,” he said.

Wage increases, as expressed in billing rates, are “still hanging in there” – but any increases are surprising in light of the fact that Corestaff is running into tough comparisons. “Last year we saw pretty good wage increases, so it might be tough to keep up the same growth rate.”

Drexel sees no spillover from the subprime meltdown, noting he already has taken the hit from anything related to housing – and the huge fix that awaits the mortgage industry might actually prompt future hiring.

“Activity for April was up compared to March, but not by a lot. In a nutshell, April was better than March but still only single digit growth compared to last year,” 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.

“Pay rates continue to move up, and the outlook from our clients still remains very positive,” Bickes noted. But all the same, “they’re approaching the ramp up in hiring with a conservative eye.”

“I think April will be pretty strong,” said Greg Palmer of Palmer Consulting and former CEO of Remedy Staffing.

He senses from talking to the clients he advises that “they’re a lot busier than some of the numbers and industry reports would have you believe.”

Palmer also continues to see “a lot of upward pressure” on wages because of the tight labor pool, and no real rescue from the cavalry of graduates about to enter the job market.

“We have fewer new job orders in April than in previous months this year, but we’re quite busy filling orders that came in this month and before,” said Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing.

As a consequence of the slowdown in new orders, she expects a downturn in May. “I don’t think this is a trend though – just a blip,” she said.

Peterson continues to have problems finding select skill sets, and the problem won’t be assuaged by this year’s class of computer majors. “Generally, the people I need are so highly skilled that new entrants to the labor force have no impact. Entry level people aren’t qualified for these jobs,” she said.

Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland with a focus on federal government work, experienced a “modest uptick” in job orders from financial and government sectors.

Wage pressures are “increasing slightly because the labor pool seems pretty tight right now,” he added.

An executive for a national staffing firm specializing in finance, accounting, and technology, says business remains strong, albeit with little to crow about from the tax season.

“The tax season is not nearly the factor it used to be in April. There’s so much work to do quite apart from taxes that the spike is not what it once was,” he said.

Business is pouring in largely because companies have such a tough time recruiting on their own behalf. “The March data will tell you that unemployment among the college-educated was 1.8 percent,” the source said. “That means our services remain sought after for both permanent and flexible staffing of highly skilled, knowledgeable workers.”

He has witnessed “no spillover effect from either real estate (subprime) or consumer credit.”

He only sees a tangential tie between labor demand and the Dow at 13,000. “The real key for us is GDP. If GDP goes below 1.5 percent, I would say it’s time to ring the bell,” he said. “But GDP is holding up at two-ish. As long as GDP is positive, we will continue with the endemic skill shortages that make it so tough for our clients to get good people.”

It also means continuing upward wage pressures, but not necessarily an acceleration. “I would say the wage bias is upward but with a degree of moderation. I would not expect the increase for the next 12 months to be as great as the increases of the last 12 months. However, there will be increases,” he said.

A spot check of localities also indicates favorable hiring conditions.

Express Personnel franchisee Jon Rolen in Murfreesboro, Tennessee, saw “very strong” demand in April and attributed it to continuing momentum from a strong March performance.

The growth primarily came from logistics and warehousing. “We have also been getting more calls for clerical and retail jobs as well,” Rolen said. “The labor market is somewhat tight right now. I’ve never really had problems finding quality associates until, really, the last few weeks.”

Marc Abatiell, Express franchisee in Dover-Rochester, New Hampshire, also had a strong April. “Business and clerical job orders performed well, while manufacturing saw a slight decline,” he said.

The Nor’easter that dumped a record amount of rain earlier this month only shut down his business for a few hours, he said.

“The labor market is tight across the board right now,” Abatiell said, pointing to difficulties in recruiting for manufacturing and engineering. “I’m also getting orders for healthcare, which means that hospitals are starting to look outside for their own recruiting.”

Booming Demand from Non-Res Construction

Non-residential construction, which was a linchpin of last month’s big number, is taking a desperate turn because of the lack of available candidates, said Daniel Conroy of the executive search firm Michael Latas & Associates in St. Louis, specializing in commercial construction.

“What we saw in March is continuing into April. We’re fielding calls from all over. What it boils down to is there’s a lack of people to handle the work that’s out there. We’re having a heck of a time finding people. It’s a real quagmire,” he said.

Wages are still increasing but do little to help the cause of recruiting. “We’re seeing some scary things out there. Young and inexperienced people are being recruited to do large projects they’re not necessarily qualified for. They’re four or five years out of school and already heading $30 to $40 million projects. It’s kind of a trial by fire,” Conroy said.

He also suspects some seepage from the subprime mortgage meltdown based on the number of resumes he’s been getting from former homebuilders. “The problem is that going from residential to commercial construction is a lot like a veterinarian trying to be a doctor,” he said.

“April was a very good month. The first quarter was very good and the second quarter, so far, is shaping up to be even better,” said Bill Stynetski, president of HardHatJobs near Dallas, another executive search firm specializing in commercial construction.

“I would say wages are holding steady. Raw materials prices are dropping, but that’s just used as a way to increase profits rather than pay more for labor,” he said.

He, too, agrees that the availability of experienced workers is getting dangerously slim and could slow future projects.

Surprisingly Brisk Hiring in Michigan

Todd Palmer, CEO of Diversified Industrial Staffing in Detroit, said his business (non-automotive) is getting a big lift from seasonal hiring in construction and landscaping. “We’re definitely feeling that seasonal effect more than we did at this time last year,” he said.

At the same time, he is stymied by the lack of available talent because of the number of people that have drifted away from Michigan or retired. “There aren’t a lot of 50 to 60 grand a year skilled workers looking for opportunities here,” he said.

Palmer sees the latest government-sponsored make-work program, involving small loans to make entrepreneurs out of former automotive workers, as an experiment destined to fail. “The governor wants to make everyone into an entrepreneur. But how can you do that with somebody who turned a screw all day long for a career? It will be very interesting to see how that works out,” he said.

“The fact is that the people the automotive companies got rid of were dead weight,” he continued.

“It’s the uneducated, unskilled worker that is the problem here. They have limited skill sets that make them very much a commodity. They’re having a difficult time readjusting from $17 an hour to their real going rate, which is more like $10,” he said. “But if you have a college degree in Michigan, your chances of being unemployed is less than 1 percent.”

Still, companies are willing to pay more for the right workers. “If they were paying $8.50 they might be willing to go to $9.50 or even go to $10,” Palmer said. Some of that flows from the state’s tiered minimum wage increase. “But companies also want a better employee and are willing to pay more because they don’t want to lose the talent.”

Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York, said his company’s growth of 33% over last year’s first quarter is testimony to the continuing high demand for top executives.

Clarke bemoans the complaints about outsourcing, which is impacting ever higher stratums of workers of the sort that Citigroup has seen fit to dispose of.

“Transferring jobs to other countries has led to a net increase in global growth and wealth and has been good for the home economy of the U.S. – the relatively low unemployment rate and years of GDP growth are strong evidence of this,” he said.

“Of course, there are strong local impacts in one plant or in one-industry towns. This creates understandable difficulties and harrowing news coverage. But the alternative of a subsidy or a hidden subsidy through import controls or tariffs, is economically disastrous and just puts of the evil day,” he said.

The U.S. Department of Labor is scheduled to release employment data for April on Friday, May 4 at 8:30 a.m. ET.

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