NEWS COVERAGE

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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S SEPTEMBER OUTLOOK

Houston, TX - September 28, 2007 - Steven Drexel, president and CEO of CORESTAFF Services, provides commentary to Gary Rosenberger's September 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 September.

Non-Farm Payrolls:
Recruiters Report Decent September Job Gains, Renewed Optimism

• Credit Crisis Not Echoing into Wider Jobs Economy; No Impact from Rate Cuts Either
• Hiring Centers on Small to Medium Companies, as Larger Firms Fall from Radar
• "Fluky" August Payrolls Data Greeted with Concern, Bafflement Then Skepticism

By Gary Rosenberger

NEW YORK (EconoPlay) Sept. 28 – September job orders rose modestly with more in the tank for October – reviving hopes about a job market that seemed to have stumbled badly after the release of an unexpectedly soft and "fluky" August payrolls report, staffing executives say.

Initial concerns that the August report would induce a climate of fear, and provoke a further hiring tailspin, were premature. The damage still seems to be contained to mortgage lending, financial services and housing with little spillage into the wider jobs economy.

Curiously, some regions that were severely impacted by the bursting of the housing bubble reported some surprising gains this month.

The concern and bafflement that greeted the preliminary August data has evolved into skepticism – all the more because the steep downward revisions for June and July actually do match the experiences of the recruiters surveyed in those prior months, while the August number seems to have overplayed the negatives and appears ripe for a revision.

The normal seasonal ramp up continues apace – and probably would have occurred without the aid of last week’s 50 basis point cut in the Fed Funds rate. Job growth continues to center around small and medium sized companies, while bigger firms seem to have dropped out.

“August was a strange month. I certainly was not expecting a 4,000 drop – and the number was not in keeping with what we experienced,” 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.

“We actually have seen continued growth in September. We have not seen any slowdown. We’re seeing a seasonal uptick – and while it’s not robust, it’s an increase nonetheless and better than what we saw last year,” Bickes added.

September Good, October Better

He sees the overall job market as “healthier” than it was a year ago or earlier this summer. “We’re seeing the normal seasonal upturn that we didn’t get last year. The tail end of the third quarter slowed down for us and it continued that way through the fourth quarter – so we’ll have easier comps to deal with as we go forward,” he said.

Bickes described the same week-over-week sequential growth patterns that he saw in August, prominently centered among medium sized and smaller, emerging companies “where we see most of the job growth happening.” And the going seems to be uphill.

“My September was better than my August – and from what I’m hearing from the field and from my client base, my October will be better than September,” Bickes said.

One further clue that that the economy is not plunging into a recession is a lack of downward pressure on pay rates, especially in semi-skilled and skilled areas. “Clients are not pushing pay rates down the way they did during the recession. Pay rates are holding up,” he said.

Bickes feels more positive about the next three to four months than he did going into the summer. “I didn’t have a very good June or July – and that huge downward revision by the BLS made me feel better about my own performance,” he said.

But he also notes the 4,000 jobs reportedly lost in August “did not match up” with his own August numbers – and expects more wild revisions from the BLS going forward.

“I’m swamped. September is still going gangbusters and I don’t know why,” said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California. “When you read the R word in the newspaper every day, you expect things to slow. But our order activity is still up. Everything happening here, to us, is so counterintuitive.”

The big turnaround from August was in permanent placement. “Perm has absolutely turned around from a very weak August. We’re probably going to have the best month of the year in perm and the month is not over yet,” Leighton said.

His bulwarks are accounting/financing and light industrial. But even clerical/administrative – a weak point all year – “is up,” Leighton said.

“I’m hearing there’s more light industrial coming our way with the holiday ramp up. It seems like it’s kicking in later than it did last year. I’m expecting a really good October. November I don’t know yet,” he said. “I know that none of this makes any sense.”

Leighton saw no spike in job orders after the Fed rate cuts in August or in September, but he wouldn’t expect an immediate response, especially with his low exposure to mortgage lending and residential construction. He does see an “increased resume flow” from ex-mortgage bankers. “But they want more pay than we can offer. And they’re not a good fit for our business anyway,” he said.

He initially did expect a downdraft in September after the awful August payrolls number was released. “We haven’t seen the negativity from it, but we still fear it. Once people start focusing on the negatives, it becomes self-fulfilling and it feeds on itself,” Leighton said.

A Normal Seasonal Ramp Up

“I’m seeing a lot of jobs out there. Our piece of the business is going very well. We’re quite pleased with the activity that we’re seeing,” said Steven List, chief operating officer at Global Employment Solutions, a national provider of professional and commercial staffing services based in Lone Tree, Colorado.

“In our light industrial division, we’re seeing the normal seasonal ramp up – and we’re happy with the staffing levels that we’re seeing. We do not see a slowdown,” he added. “The problem for us is not getting orders, but finding suitable candidates to place.”

List is aware of predictions that the holiday season should slow because of the price of oil and the tremors in the housing and credit markets. “But we’re not seeing any of that. We’re comfortable with our business outlook for the fourth quarter,” he said. “We don’t have any exposure to mortgage lending. But we consider it a good place from which to draw candidates for our internal hires – and we are in a hiring mode.”

Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide, upgraded his negative outlook on the job market to mildly positive. But even he was surprised by that August BLS report. “My business had been pretty darn flat for months – but nothing like a collapse,” he said.

He had been hearing bad things from his customers throughout the summer. “Everybody was cutting back a shift here and there or cutting back on costs,” he said.

“Now I’m feeling more optimistic,” Drexel stated. “There’s more positive discussion going on ever since the Fed cut interest rates. I’m hoping the worst is behind us. For a number of months all I was hearing was about retrenching. I’m not hearing about retrenching anymore.”

He, too, is getting signals about more seasonal work in the pipeline from retailers and charity organizations. “October is looking better for me than September,” he said.

Through it all, wages “remain remarkably strong – that’s a part of our business that is still holding pretty well.” He also continues to see a slowdown in hiring from the biggest companies and “more opportunities from small companies. That’s been consistent,” Drexel said.

“We continue to be strong, up 30 to 40 percent from last year,” said Allan Brown, president of Doherty Staffing Solutions in Minneapolis. “I know Target lowered its forecast, which doesn’t bode well for holiday retail. But could this be part of a shift to on-line retail?”

He has no exposure to the mortgage sector, but does see “robust orders” from clients in the industrial sector, which he sees undergoing its normal pre-holiday ramp up.

Brown also described progress on the permanent hiring front in September, after experiencing a soft August. “It’s October that I’m really excited about. Probably we’ll have the biggest October our company ever had,” he added. “Last year we were sitting at 2,200 to 2,300 temp employees. This year we’re over 3,000 and I expect another 10 to 15 percent increase in the next 45 days.”

“I’m busier in September than I was in August – and I was pretty busy in August,” said Todd Palmer, CEO of Diversified Industrial Staffing in Detroit. He was actually hoping the UAW strike would last longer as it would have meant more orders for temp workers from GM and a larger pool of available candidates for job postings that are going unfilled.

Palmer was surprised by the soft payrolls number in August – but maybe not too surprised considering his latest bone of contention – Michigan’s “No Worker Left Behind” retraining program. “It means layed-off workers won’t come to work for people like me. The state is basically paying people not to take jobs they’re perfectly qualified for,” he said.

A Disappointing Month for Some

Not everyone was upbeat about September. Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states, regards the month as a disappointment – all the more after a particularly good end to August.

“September was not good. It improved last week on direct hire and temp to perm, but otherwise it was really slow,” Sigrist said. “One thing I’ve noticed is that my Eastern and Midwest offices are doing better than my Western offices. I don’t know why that would be the case. It could be just a Stivers thing.”

Sigrist feels it’s too early to see any impact from the Fed rate cuts. “Obviously that won’t have any impact on us until it begins to have a positive impact on the mortgage market – and that hasn’t happened yet.”

Slow as things are, he too is incredulous about last month’s BLS data. “Minus 4,000 is such a fluke. What are 4,000 jobs in the wider scheme of things? I couldn’t believe how it was portrayed in the media and by Wall Street, and how everyone so over-reacted,” Sigrist said.

Marjie Peterson, president of Macrostaff in Bellevue, Washington, a specialist in I/T staffing, experienced a “seriously slow month in terms of new orders that does not bode well for October.”

She did observe a pickup at the tail end of the month, but doubts there was any connection to the interest rate cut. “I would expect it to take more time for that to filter through the economy.”

Peterson is still having a hard time finding candidates, and is getting no relief from the alleged layoffs in the mortgage industry.

“The rumors of the demise of professional staffing have been greatly exaggerated. Looking at my numbers, as a practical matter you could balance a dime between June and this past week,” said an executive for a national staffing firm specializing in finance, accounting, and technology.

“If you were to look at our operating data – and you didn’t read the paper or watch TV – you would have no idea there was an economic crisis caused by subprime mortgages and the credit crunch,” the source said. Indeed, he harbors hopes that the mortgage crisis will spur more hiring of accountants as it did with Sarbanes-Oxley or the S&L crisis of 1989 to 1991.

“Our internal operating metrics haven’t changed. How many people we interview, how long it takes to make an offer, how many orders we fill – it’s all very disconnected from the headlines,” he said. “Our revenues, while not growing at a brisk pace anymore, remain at a healthy level with a good degree of stability.”

He had been concerned that August data would be a negative weight on future hiring. “After seeing the August number, every schmuck out there that’s hiring was asking himself am I the only schmuck that’s hiring? It can lead to a very negative psychology.”

The source is watching financial services with extra scrutiny these days. “That is holding steady,” he said. “The big fear is the big investment houses are going to pull their horns in. I’m not seeing that to date.”

Janis Petrini, an Express Personnel franchisee from Grand Rapids, Michigan, called September “a solid month” in her market but worries about the momentum slowing. “We were actually ahead of last year,” she said. “Most of our manufacturing clients were busy and had a lot of orders. Everyone was riding a nice wave, hoping it would go all the way through December.”

Now she is less sure. The momentum she saw earlier “seems to be subsiding a little bit.”

Medical, food, and education are still booming industries in Michigan. But the housing market is being pounded by the mortgage crisis. “In our area, there are around 12,000 listings right now. It’s the most we’ve ever seen. Banks and mortgage companies are very concerned,” she said, adding one builder she works with has one-tenth the work he used to have.

She has yet to hear from her retail clients about holiday hiring. “No one is calling to say they need to get prepared for a crunch, and we’re not seeing any kind of momentum yet. Even the media has been quiet about holiday retail, and we typically see a lot more reports about it.”

Even so, she suffers from “a recruiting crisis.” The number of ‘A’ candidates available to her is slim. “Our clients are taking longer to find qualified candidates. They want to see five quality candidates and we can only provide two.” The tight labor pool and higher living costs have emboldened workers to ask for higher wages, but companies are no yet meeting their demands, she said.

Things turned around in the executive suite as well. “We are somewhat surprised to report a surge in demand for executive search assignments. The much discussed credit crunch is not impacting our business overall,” said Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York.

He credits the falling dollar for boosting his manufacturing practice, and high oil prices for generating demand for energy executives. “There is, of course, an offsetting reduction in financial services, especially those focused on mortgage divisions. Fortunately, we are less active in that area,” Clarke said.

His CEO contacts “breathed a collective sigh of relief” after hearing about the Fed rate cut. “They saw this as a signal that the Fed will not allow the economy to tank. Acquisitions and other projects which were held back for funding can now be financed. This is good for the executive search industry,” Clarke said.

Clarke sees counteracting forces at play in the financial services sector. “Some feel safer standing pat with their current employer and do not want to risk moving. Others fear getting fired, or no bonus benefit in staying, and are looking to move. The relative outcome of the two forces depends on how exposed the employee is to the credit crunch,” Clarke added.

He sees manufacturing strengthening, especially in Detroit, between the GM labor settlement, new leadership at Chrysler and signs of a turnaround for Ford.

Cracks in Commercial Construction

Daniel Conroy of Michael Latas & Associates in St. Louis sees little changed in the redoubtable commercial construction arena. “However, there appears to be some slowing for small to mid-size firms. The larger general contractors – above $200 million – seem to be extremely busy. Larger projects are continuing to hit the drawing boards.”

He also sees an increase in environmental projects, like water and wastewater treatment plants and new ethanol and wind-farm projects.

Bill Stynetski, CEO of HardHatJobs in Dallas, said neither the credit squeeze nor the Fed’s response to it, have trickled through commercial construction yet. “It takes some time for the industry to react,” he said. “I’m seeing the same level of activity that I saw in August.”

But Ken Simonson, chief economist for the Associated General Contractors of America, has gotten reports from contractors “who are seeing a pullback in nonresidential construction.” Previously all his negative reports were limited to residential developers. However, “the majority of nonresidential contractors still say there has been no letup in their business,” he noted.

He has surveyed his membership over whether the “turmoil in financial markets is having any effect on demand for construction or your ability to obtain financing.” One Southwest developer replied to the negative on both questions – but went on to state his worries over the implication of new immigration rules on job growth.

“The Federal government seems to have botched the opportunity last summer to pass meaningful reform, and the states’ attempts to handle it seem to be making the labor situation worse, especially in Arizona,” he said. “Hopefully, Arizona’s immigration bill, scheduled to go into effect in January will be overturned or we could see chaos in the Arizona service, construction and agriculture markets.”

The U.S. Department of Labor is scheduled to release employment data for September on Friday, Oct. 5 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.

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