NEWS COVERAGE

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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S JUNE OUTLOOK

Houston, TX - June 29, 2007 - Steven Drexel, president and CEO of CORESTAFF Services, provides commentary to Gary Rosenberger's June 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 June outlook.

Non-Farm Payrolls:
Recruiters:  June Jobs Disappoint, Optimistic 2H Expectations Thwarted

• Summer's Industrial Ramp Up Slower than Anticipated
• In Tight Labor Markets, the Search for Skilled Professionals Drags On
• Wage Pressures Decelerating Despite Higher Living Costs

By Gary Rosenberger

NEW YORK (EconoPlay) June 29 – Hiring was slower than expected in June as employers were handcuffed by a host of economic challenges led by the housing slump, the subprime blowout, and high gas prices – thwarting optimistic expectations for the second half of 2007, recruiters say.

The slowdown cut across a wide swath of skills and professions, with the normal summer ramp-up in logistics and retail deemed particularly disappointing.

Professional areas like information technology or finance and accounting were also slowed for a variety of reasons, including a paucity of ideal candidates and seasonal factors related to the end of the tax season.

There were exceptions to the unsatisfying picture. Commercial construction and Internet fulfillment is reported to be robust, while meatpacking companies are now in dire need following recent immigration raids. Executive hiring remains strong due to high turnover.

One consequence of disappointing job orders on one side and disappointing candidates on the other is that wage pressures appear to have decelerated despite higher living costs.

"I’m going to tell you that I was not pleased with June. June was not what I expected it to be – and, in my opinion, it’s not as good as last June," said Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states.

He speculates that companies might be using interns in lieu of paid summer help – "or else they have gotten so used to reporting big profits that they’re cutting costs and reducing staffing."

There might an added downward blip from housing and mortgage-related orders, "although that’s a very small portion of my business," he added.

Sigrist sees wage pressures contained despite surges in food and energy costs. "You can’t have upward wage pressures when you don’t have enough orders. If the orders were there, maybe we’d see more people complaining about the higher cost for gasoline and food," he said.

No Pickup Anticipated

"June was up just a little bit," said Steven Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide. "The good news is there’s nothing contracting. The bad news is that we were hoping to see more acceleration."

Drexel was expecting orders to pick up in the second half, but now is less certain about it. "We’re sitting on the end of June and I haven’t seen the big pickup. So you start to worry about whether it’s going to pick up and when," he said.

With hiring stalling, he now sees "a little deceleration" in wage pressures. "Wages are still up over last year, but the rate of increase is slowing. For us, it’s no longer double digits like it once was," Drexel said.

He doubts gasoline prices have much to do with the current slowdown, but that could change. "There’s always a little lag there. Consumers already had their budgets in place for summer travel and retail purchases. Maybe we’ll feel a pullback in the next month or two," he said. "Energy costs could have an effect on job growth if they start to interfere with corporate profits."

For now, Drexel sees any slowdown as temporary. "I think it’s just a matter of the timing of the recovery. I don’t think there’s anything fundamental or long-term to be concerned about," he said. "The recovery is just happening a little more slowly than we expected."

"In June, so far, sales haven’t been ramping," said Chuck Miller, CEO of People 2.0 in West Chester, Pennsylvania, which provides I/T, financing, back office and other critical services to independent staffing firms nationwide.

"A lot depends on the individual market. We have operations in 31 states, and they’re all over the board with different things driving different markets," he said.

"I saw a slight uptick in June, but nowhere near the aggressiveness that the prognosticators were predicting earlier in the year for the second half. The companies in our network are experiencing just a little slower growth," Miller said.

Decisions Being Put Off

"June is better than May, but it’s not that great," said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California, specializing in logistics, light industrial, and finance and accounting throughout southern California.

"We were waiting for the beginning of the second-half ramp up and it didn’t come. High-end accounting and finance is still booming, but general staffing is in the doldrums," he said. "Business is not where we thought it was going to be, and I’m not seeing evidence of an impending breakout."

Retail and logistics are the early drivers for that seasonal ramp. "But things are being put off. What they used to do in June, they’re now delaying until August and September," Leighton said. "Retailers aren’t shipping things because they don’t want to risk being caught with inventory. So logistics is being stretched forward and that is impacting us."

It could be that retailers are worried about gas prices but he can’t say with certainty. "Gas prices should have an impact in California because we are a car society and high gas prices make people less mobile. It also makes them less willing to travel long distances for work," he said.

Leighton sees no pressing need to raise wages to attract candidates with job orders coming in more slowly than expected.

Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing, also saw a June dip that she finds perplexing. "In terms of incoming orders, June is the worst month this year. Orders are down and decision-making seems to be slowing for most of my clients," she said. "I really don’t know why it’s slowing. I’m hoping that it’s just a blip."

Because orders are down in June, fulfillment will be down in July "because it gives us so little to work on." Also, with orders down, clearly there are no wage pressures up, Peterson added.

Greg Palmer, CEO of Palmer Consulting and former CEO Remedy Staffing, sees a divide between professional staffing, which remains healthy, and a downward slope for everyone else.

"Light industrial and clerical numbers are trending negative year over year. There’s a softening there," he said. Palmer regards light industrial as the canary in the coal mine for jobs – "it’s the first to soften up, and the first to accelerate in a recovery."

He sees businesses becoming more cautious in their response to economic conditions, especially on the clerical side, which would be affected by problems in mortgage lending and the housing slump.

"On the converse side, it still feels like the professional side is robust – and permanent hiring, which usually involves skilled areas, is still pretty strong," he added.

Palmer is now of two minds over whether the current slowdown is a "mid-cycle pause or something longer lasting" – noting that he, too, has reconsidered his optimistic forecast for the second half in recent days.

An executive for a national staffing firm specializing in accounting and finance, technology and other professional categories sees his own market as healthy but moderating. "We continue to see a degree of growth in technology. We’re not off to the races, but we do see growth," the source said.

"In finance and accounting we’re seeing the normal seasonal second quarter slowdown that you get after tax season. But it’s nothing more than normal seasonal patterns at play. The second quarter is always slower for finance and accounting," he said.

Healthcare and government work continue “in a growing mode,” the source added. "The professional niches we specialize in have been stable with the normal seasonal patterns intact. There are a lot of areas that are not great. But, where we are, things are fine."

Allan Brown, president of Doherty Staffing Solutions in Minneapolis has a somewhat more positive slant on the staffing business.

"Our June compared to May was up 5 percent on orders. We’re seeing evidence of a little bit of acceleration, but it’s choppy. One week you have something, next week it comes off," he said.

He, too, believes his industry may have miscalculated on the upturn. "The forecasters were saying June would be a knockout month, but I’m not seeing that," Brown said.

But there are bright spots. Brown sees Internet retail ramping up earlier than normal. "A couple of clients started their programs early. These are Internet fulfillment companies and they want their employees trained in time for fall," Brown said.

Internet retailers are anticipating strong growth for the remainder of 2008 through 2009. "Their expectations for the fall season are high, to the point where they’re adding employees sooner than normal. That might be a bad omen for the traditional retail stores, who would lose market share," Brown said.

"Every Internet fulfillment company I spoke to in the last 30 to 45 days has strong holiday forecasts. More people are shopping on the net. It’s become a part of life. People are no longer afraid to shop on the Internet as they were at the beginning," he added.

Brown sees burgeoning wage pressures in his region sparked by a minimum wage increase next week in Illinois to $7.50 an hour from $6.50 – up from $5.50 a year ago.

Immigration Raids Spur Job Orders

He also anticipates wide repercussions on wages from immigration raids on meatpacking plants. "The whole market is shaking because of what’s going on with Homeland Security. Companies are troubled by that. There’s more awareness about undocumented workers and that has implications on wages," Brown said.

"People are being rounded up and taken away," he said. "When you’re paying $8 or under you’re probably getting a high flow of undocumented workers."

Brown has seen a spike in demand at food processing plants because of the need to replace undocumented workers – the problem is in finding qualified people willing to take the job. "The applicant flow is high on the industrial side, but we’re seeing a lower caliber of individuals," he said.

Meanwhile, demand for permanent workers "is as good as or better than it ever was in terms of the quality and quantity of new orders."

But companies are also more cautious about who they hire. "They’ve been accustomed to hiring only ideal candidates and those are getting scarcer. The hiring process is being delayed because they can’t find the perfect person," Brown said.

Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York, said recruiting at the top tiers continues to thrive. His company is growing at a pace of 43% year to date, up from 40% through May. "This indicates a continuing high level of demand for senior executives."

Clarke notes that any move by a chief executive often means a shakeup of entire teams of lower-ranking executives. "We are seeing record CEO turnover in the U.S. today and this is driving the search industry forward," he said.

Clarke’s CEO contacts report that inflation expectations are a key issue these days "and most seem to think we are in for continued high gas and maybe food prices." While that has a disproportionate impact on lower-tier workers, wage pressures continue to be tamped down by immigration and competition from low-wage nations, Clarke observes.

In addition, he believes restrictive Fed policies contribute to an environment of layoffs and worker insecurity, further curbing any wage pressures. "But for key executives, we see the booming demand fueling higher pay," Clarke added.

Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland, said job orders in his neck of the I/T world is "steady and flat." When asked whether he sees renewed pressure on wages due to higher food, gasoline or other living costs, he replied "did it ever cease?"

Ziman continues to see an incremental shrinkage of his applicant pool, and each month that passes makes it tougher to find new hires.

Todd Palmer, CEO of Diversified Industrial Staffing in Detroit, said if one were to discount for automotive layoffs, the job picture in Michigan wouldn’t be all that brutal. "There are talented people out of work and skilled labor jobs that need filling," he said. "It would seem that there is an obvious solution to that, yet things aren’t working out that way."

Workers, he notes, are holding themselves back by "a mix of stubbornness and denial."

Those who had gotten used to cushy automotive jobs are looking for like situations that no longer exist. "Unfortunately, they are holding out, waiting for the auto industry to rebound and their dream job to return, rather than take a lower paying job," he said.

An executive search firm specializing in commercial construction reports a further updraft in hiring. "June was outstanding and July will be even better," said Bill Stynetski, CEO of HardHatJobs in Dallas, specializing in commercial construction. "I have as many interviews planned in July alone as I did in the entire second quarter."

He argues that current strength in commercial construction was born at a time of historically low interest rates, and that current groundbreakings are the product of ideas born years ago. "Low interest rates, investment money and endowments fueled a boom in construction for hospitals, schools and all types of commercial projects," he said.

Stynetski expects construction hiring to "reach a crescendo" in July, August and September.

David Denyam, Express Personnel Services franchisee in Palm Beach, Florida, reports just "average" job orders for June, with the local economy having slowed in recent weeks. "To be honest, I expected things to pick up, but they really haven’t," he said.

The only strong performer continues to be "anything high tech or technical" – but that is more than offset by slackening residential construction spilling into local manufacturing, he said.

Denyam notes that workers are not clamoring for wage increases because of high gasoline prices, but "some are voicing a preference for jobs closer to home," he said.

Mark Kays, Express Personnel Services franchisee in Independence, Kansas, reports "substantial" job growth in his market in June. "Business has doubled over May," he said.

"Office services have picked up dramatically – and we have made a conscious effort to pursue this sector," Kays said. He also reports that two clients recently increased wages to attract a better class of employees.

Also, the job market for this year’s graduation class appears excellent to him. "There are more summer jobs than there are people to fill them," he said.

The U.S. Department of Labor is scheduled to release employment data for June on Friday, July 6 at 8:30 a.m. ET.

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About CORESTAFF Services

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.

Visit CORESTAFF Services on the Web at: www.corestaff.com.

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