NEWS COVERAGE
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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S AUGUST OUTLOOK
Houston, TX - September 10, 2007 - Steven Drexel, president and CEO of CORESTAFF Services, provides commentary to Gary Rosenberger's August 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 August outlook.
Non-Farm Payrolls:
Recruiters: August Jobs Surprise on Upside, Minimal Blowback from Credit Crisis
- An Almost Inexplicable Jobs Spike Spotted in Mid August
- Job Losses Not Radiating Far from Epicenter of Mortgage Banking Shakeup
- After Recession Scares, a Normal Seasonal Ramp Up Now Expected
By Gary Rosenberger
NEW YORK (EconoPlay) Aug. 31 – An unexpected, deeply counterintuitive, jobs surge occurred in mid-August that defied expectations for a slowdown prompted by the crisis in mortgage lending and the seemingly intractable housing slump, staffing executives say.
Job losses were contained to real estate, mortgage lending and discrete segments of the investment community impacted by the credit crunch – and did not appear to have radiated into the wider economy.
The pickup in hiring, particularly on the temporary labor front, suggests a return to the normal seasonal ramp up that many in the staffing industry thought would be delayed, or not come about at all, amid concerns that the economy was headed for a recession.
But employers are not exactly enthusiastic about the economy’s direction either, as evidenced by a reported flattening and delays in permanent hiring. All they do know is that there’s work to be done and there’s a need for labor.
Some also suspect the jump in labor demand reflects the wave of students returning to school from that modern form of servitude known as summer internships.
An Unexpected Spike
We saw much better job growth for August compared to July,” 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.
Bickes had been disappointed with his performance year to date before things erupted in mid-August. “Last week, which was week 33 of the calendar year, we had our all-time high in revenues for a single week,” he said.
“I don’t think it’s just me that’s feeling better,” Bickes said. “I’m hearing from competitors that they’re feeling a whole lot better than they did in the late June through July period.”
Revenues have been “trickling up” in the last three weeks, Bickes added. “Over the last three weeks we’ve seen nice sequential growth in the number of employees assigned and a slight uptick in hours of work, which suggests our clients are working overtime.”
Bickes emphasizes that three weeks do not make a trend. “But I do think we’ll have something of a seasonal uptick this year. We did not see much of a ramp up last year. This year I’m hoping we’ll see the more typical kind of ramp up that we saw two years ago,” he said.
Bickes noticed a small drop off in permanent hiring but thinks the signal is relatively benign. “My initial thought is that, as business picks up, employers are just being cautious about how quickly they add full-time staff and who they hire.”
Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states, saw a rebound in job orders in the middle of the month that restored hope after a disappointingly flat performance in the prior weeks and months.
“The one glimmer I had was last week, when new orders were up from the rest of the third quarter. It’s just one week out of an otherwise flat quarter, so I’m not drawing any conclusions,” he said. “Did it go up dramatically? No. But it was up and I’m hoping it continues that way for the remainder of the quarter and the year.”
One possibility is that companies returned to traditional labor providers to fill administrative needs after summer interns went back to school. “We thought internships were part of the problem this summer, which was very slow until that pickup we saw last week,” he said.
Sigrist has no problems filling orders when they do come (his fill rate is about 90%), suggesting to him that labor shortages are overstated. “Demand for salaries is not there yet. People are just glad to be working considering all the layoffs in the mortgage industry,” he said.
Interestingly, Sigrist already saw orders from the mortgage industry slip away in the second quarter, “so it didn’t affect our third quarter,” he said. “We had many clients in the mortgage industry in the last couple of years. They saw what was coming three or four months ago and they just stopped hiring.”
Scott Leighton, controller at Helpmates Staffing Services in Irvine, California, was also caught off guard by the positive turn of events. “We’re having a good month. It’s across the board. It’s strongest in industrial where we’re up a good 25 percent from a year ago and 13 percent from the prior month,” he said.
“It’s the seasonal ramp up, and it feels strong to me,” Leighton said. “For all we know, it could fall off the face of the earth next week. But I didn’t expect August to be this strong.”
The biggest surprise for him is that his clerical division is holding up. “That was supposed to be the harbinger of what’s happened to the mortgage industry, especially here in California where Countrywide layed off 2,000 people,” he said.
However, he simultaneously spotted a “considerable slowdown” on the perm side of his business. “That may be sending a signal that companies are thinking twice about how they’re going to move forward and delaying hiring decisions,” he said.
Reality At Odds with Expectations
“I thought the job market would get sticky and openings would slow down. It’s been just the opposite. Things are strong. It’s bizarre,” said Allan Brown, president of Doherty Staffing Solutions in Minneapolis.
On a weekly basis, August was up 30%, 38%, 46% and 37% from the same weeks last year. “A lot of it is new business, but we’re still looking at organic growth,” Brown said. And because his numbers were flat from October through the end of 2006, he anticipates comps to run strong through the end of 2007.
He has picked up a couple of large national accounts in the semiconductor industry that he took from competitors (so his good news is canceled out by someone else’s bad news). “But Internet fulfillment is stronger than it ever was, with high projections for the third and fourth quarter,” he said.
His perm business is off, but orders remain strong, suggesting a lack of qualified workers to fill need in a tight labor market, he said.
Brown sees job growth dominated by small and mid-sized firms not exposed to the wild swings in the stock and credit markets. “The big staffing firms are in trouble because they’re so dependent on those big national accounts. But I’m not feeling it,” Brown said. “Right now, we’re strong. The mortgage industry is not a factor where we are, nor among the industries that we serve. I don’t anticipate any problems for the fall and into January. Beyond that, I don’t know.”
Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide, saw a relatively lackluster August. “I’m not seeing the kind of pickup that I always hope to see this time of year,” he said.
Drexel does sense “a little weakness” in his divisions that would be affected by housing and the mortgage industry. “My thought is it won’t last long. We’re just in the middle of a sensitive spot. I’ve seen no drop in my business. But I am sensing a wait and see attitude, and I’m not encouraged by that,” he said. “Then again, our industry didn’t boom when the stock market was booming, and it didn’t tank when the stock market tanked. Nothing we do is that connected or that direct.”
The economic fundamentals still favor hiring, in his view. “It’s just that people are a little more risk-averse right now,” he said. “I have heard that people are taking a little longer to make decisions, but we still have good numbers and we’re still growing.”
Drexel further observed that most of the softening in job orders from mortgage banks and the housing sector was played out long before the Fed reacted. “We felt the big drag from that last year,” he said.
An executive for a national staffing firm specializing in finance, accounting, and technology, sees little spillover from the mortgage market meltdown. “I know this isn’t what you’re expecting, but I’ve seen no noticeable change in our business,” the source said.
“I read the newspapers, and I see what’s happening to financial markets,” he added. “But truthfully it has not hit us yet. In the professional niches we’re in, the market is still supply-constrained. It could all change – but to what degree, and when, I don’t know.”
A Jobs Turnaround in Michigan
“We’re busy as hell,” said Todd Palmer, CEO of Diversified Industrial Staffing in Detroit. “I’m adding two or three new people in the next 30 days. These are internal hires. There’s a crushing need for talent. It’s switched back in Michigan from where I can’t get enough orders to I can’t get enough people.”
And while he does see a surge in demand for workers of all types, “I also see some stretching out in the time companies take to place permanent staff.”
Interestingly, he has gotten “tons of responses” on marketing job postings from people who were formerly employed in the mortgage industry.
Palmer, who belongs to a local EO (Entrepreneur Organization), said “just about all of the 83 members are hiring. It’s been that way for the last 60 days.”
Yet another executive sees the yearly ramp up in nearly full blossom. “I just finished calculating an average for my last three weeks of July and first four weeks of August, and August is up 10 percent over July,” said Steve Pennington, president of commercial staffing for Global Employment Solutions, a national provider of staffing services based in Lone Tree, Colorado.
His run rate for the latest week of August is 9% above the rest of August, “so my fall is on the move,” said Pennington, who works in Atlanta and refers only to his Georgia operations.
“We’re up in August and September like we’re supposed to be. Growth is not as high as last year, but at least we’re on the move for the fall, just as I budgeted,” he said.
There have been internal discussions about the repercussions of the credit crunch and so far there’s been no suggestion of a spillover into the wider job market. “I have a client, a carpet manufacturer, and he is down this year because of new home sales. I have another client that does plastic extruded facings for doors, and he’s down,” Pennington said. “But I haven’t seen this spill into my other businesses.”
He does see some wage pressure in Georgia, which he attributes to a statewide crackdown on illegal immigrant labor – and on new laws that put the onus on businesses to confirm the authenticity of social security cards and work permits (all Georgia companies will have to comply by June 2009). “I think that has impacted low-end labor already. I don’t know who’ll hang sheetrock in Atlanta after ’09,” he said.
Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York, saw a drop off of sorts in August. “August is vacation time for many of our client CEO's and senior candidates. It is therefore a quieter month every year,” he said.
He does expect a broader slowdown at some point because of the credit crisis. “Our client CEOs, who mostly run large multinationals, tell us they’re considering the implications,” Clarke said. “Unfortunately, this means that there is typically a delay in investment decisions and hiring decisions until the CEOs form a clearer view of where things are going.”
CEO opinion is divided by sector and by individual situation. “But there is a consensus that the cheap and easy credit that allowed the private capital buyout boom is over. Private capital buyouts were driving some of the growth in the senior executive search market,” he said. “The tightness in the commercial paper and corporate bond markets will reduce investment and job growth. This said, we have full employment and the action by the Fed to support the credit markets might boost confidence.”
Boyden’s financial services practice head, Jeanne Branthover, based in New York, says she is finding many teams on Wall Street more amenable to a move due to the impact of the crisis on their firms and on their potential bonuses.
Greg Palmer, CEO of Palmer Consulting and former CEO of Remedy Staffing, continues to see a rift between big businesses and small. “The small guys are hiring. Most big guys are not.”
The only segment he sees likely to get a black eye over the real-estate/credit imbroglio is clerical employment – with I/T, accounting and healthcare “all holding up,” he added.
Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing, was positively aglow about August. “I don’t know what demand was like in the rest of the country, but in the Pacific Northwest, demand remained high. Orders were strong, and placements were high,” she said. “I haven’t seen any impact yet from the (turmoil) in the credit and stock markets.”
Darren Bakay, senior technical recruiting manager at Ajilon-Adecco in New York, which serves New York’s largest financial institutions, also saw “some good stuff” in August.
“Usually things pick up in September. But they picked up a little earlier than normal this year. I don’t know why that is, especially when you think about the credit crunch and the stock market with its ups and downs,” he said.
Mike Ziman, president of Global Commerce & Information, an I/T staffing firm in Columbia, Maryland, saw activity pick up “a little bit” in the last 30 days in the government sector – and no wide repercussions from the credit crunch.
Things also remain healthy in commercial construction with no blowback yet from the credit crisis. Bill Stynetski, CEO of HardHatJobs in Dallas, specializing in commercial construction, saw no spillover into commercial construction. “I’ve seen no cancellations on projects nor anything put on the backburner, and just a few projects going back for redesign,” he said.
“In my opinion, all those credit institutions blaming their problems on the housing recession are just covering their butts for all the bad loan decisions they made,” he said.
He is seeing a shift of residential executives applying for non-residential construction jobs. “In the last month, I received a large number of resumes of $150,000 to $200,000 executives who lost their jobs in residential construction, primarily from Florida to Virginia,” he said.
“Commercial construction is still strong. The only slowdown I anticipate is for strip malls that have grocery stores and pizza parlors because you don’t need that when you don’t build those 500 homes on a thousand acres,” he said.
Daniel Conroy of Michael Latas & Associates in St. Louis, an executive search firm specializing in commercial construction anticipates some effect from the credit meltdown. “But I haven’t seen anything yet,” he noted. “Construction activity moves so slow, and there is so much work in the pipeline. I’m not seeing any spillover. But it’s not the kind of thing that happens overnight.”
All of his divisions have been busy. “We’re seeing more projects coming on than there are qualified people to get them done. Our clients will just have to get their people from the competition,” Conroy said, adding that wages are as “strong as I’ve ever seen.”
“Ultimately, I foresee some type of correction, but it’s not happening now. It’s just going to be a wait and see game,” Conroy said.
The U.S. Department of Labor released employment data for August on Friday, Sept. 7 at 8:30 a.m. ET.
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