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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S DECEMBER OUTLOOK

Houston, TX - January 14, 2008 - Steven Drexel, president and CEO of CORESTAFF Services, provides commentary to Gary Rosenberger's 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 December.

Non-Farm Payrolls:
Recruiters: An Unexpected Jobs Spurt in December Backed By Christmas Hiring

• 2007 Ends on a High Note Against All Odds, Immediate Outlook Improves
• Dollar's Collapse Provides Underpinnings for Further Job Creation
• A Minor Dent from Bad Weather, Subprime Fallout

By Gary Rosenberger

NEW YORK (EconoPlay) Dec. 25 – Recruiters are reporting an unexpected upturn in demand for labor in December, a month when vacations and bad weather normally portend a slowing, with much of that growth fueled by the retail economy and the distribution networks that feed it.

Some saw the dollar’s collapse providing the underpinnings for a portion of that job growth, as manufacturing shifts back to U.S. factories now well-positioned to expand their global reach, even if they give ground on the domestic front because of the housing slump.

The collateral damage from the subprime blowout or housing’s woes was minimal in December, never a big hiring month anyway for residential housing (now entering the slow season) or for financial services, where the pain is not radiating too far from Manhattan.

The heartland had its own problems with ice storms and blizzards, even flooding in the Northwest, but the disruptions from weather appeared to be minor, if not somewhat expected.

The upswing is playing against recession alerts from Wall Street and the media to foster confusion for those in the employment trenches – with no one quite sure how to plan for a downturn that now seems a little less certain or severe.

“December is holding up better than expected. We had a couple record weeks back to back,” said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California.

“I think we’re seeing the late shopping for Christmas,” he said. “In logistics it’s also being driven to a large extent by Internet retail, where there was also a lot of last-minute activity.”

Retailers are also revving up for the gift-card redemption season, which began on Wednesday and should continue into January. “It’s looking good. And I do mean it’s looking good,” he added.

All the talk about a recession is weighing on his planning for next year. “All the big guns in our industry are reporting that they’re down – and whatever is impacting them should eventually get to us. We have to get ready for it,” Leighton said, adding that the biggest cloud over the California economy is home foreclosures.

He has seen no repercussions so far from the subprime meltdown on accounting staffing, other than how it expanded his pool of candidates. Any real concussion on investment banks “is a New York problem,” Leighton added. “Other than maybe Countrywide and Wells Fargo, all we have in California are small branch offices that wouldn’t be affected.”

He posits that the big publicly traded staffing firms are more impacted by such rumblings because of their exposure to large corporations. “The Fortune 500 contract business is very fickle. They are heavy users of marginal staffing, and they cut back at the slightest provocation,” he said.

“The margins are also razor thin, so they rely on volume business to compensate for that. If they lose any of that volume they’re in trouble,” Leighton said. “We walk away from those big contracts.”

He saw nothing out of the ordinary on wage pressures in December. But come January, California raises its minimum wage by another 50 cents to $8.00 an hour, and two big clients will be impacted. “Their attitude is ho-hum. They had two years to prepare for it,” he said.

A Weak Dollar Boosts Jobs

“I think we held our own and even inched up a little bit sequentially,” said Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide. “We didn’t kill, but for a December it’s really held up well. We usually expect a tail off after Thanksgiving, but we were able to hang on. It didn’t fall off in light industrial as we might have expected.”

Drexel has only recently begun to see evidence of manufacturing jobs shifting back to the United States. “One of my Florida clients told me he has seen some work shifting back to him from China because of the quality issues,” he said. “High energy prices also make it better to manufacturer closer to home. And the value of the dollar is bringing some work back. I’ve heard all this just in the last month.”

Another “bullish sign” is the trajectory on wages, which came on strong at year’s end after a soft patch last summer – prompted by a shortage of talent and by corporate budgets returning to human resources after being diverted to pay for raw commodities, he said.

On the downside is financial services, where he sees a “tightening up” by mortgage lenders and investment banks.

Drexel said any impact from the Midwest storms and the floods in Seattle was fairly contained. “It made a difference locally, but we always budget for that sort of thing this time of year. It’s usually a flash in the pan that clears up in about a week,” he said.

Things seem to be moving in the right direction, and yet no day goes by when the business pages don’t rip with predictions of a coming downturn. “What it does is force me to keep my options open. Maybe I get more conservative in my decisions. Maybe I get a little less confident that if I increase spending, I can support it with sales or margins,” Drexel said.

Right now, he’s betting that the weak dollar will keep the jobs economy on course. “You combine the weak dollar with strong foreign economies, especially those emerging economies, and strong demand overseas will probably keep us out of recession,” he said.

“It was a little better in December than I expected it to be,” said Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states. “Right through last week, when our December normally slows, it was stronger than I expected, especially in light of how flat it was in September, October and November. The weather had no effect on our business whatsoever.”

His December performance was all the more surprising in light of “all the recession talk” and administrative/clerical having been a particular soft spot for the staffing industry. “I was expecting a mini recession in December with a bigger one to come in spring. But it didn’t happen,” he said.

Sigrist declined to analyze what prompted his turnaround, all the more since he was expecting the opposite to happen. “We saw orders coming from a wide variety of industries. There’s nothing that I can pinpoint other than that it was all better than expected,” he said.

He is withholding judgment about 2008. “I’m not answerable to shareholders, so I can wait and budget six weeks into the New Year, when I can get a more realistic feel for what is going to happen.”

Picking Up on Surprising Strength

Greg Palmer, CEO of Palmer Consulting and the former CEO of Remedy Staffing, feels that the jobs economy continues to trend downward, but he too was surprised (and puzzled) by the December surge.

“I talked to half a dozen light industrial guys and they’re picking up on surprising strength in December. The retailers seem to be stronger as seen from the logistics end of the supply chain. I saw surprising strength from at least three of my clients,” Palmer said. “They’re seeing good volume on direct hire as well.”

Any bad news for December is limited to “that cloud on financial services and mortgage banking, so there are still pockets that are slow,” Palmer said.

“Light industrial is as strong as it’s ever been. This is the strongest December we ever had,” said Steven List, chief operating officer at Global Employment Solutions, a national provider of professional and commercial staffing services based in Lone Tree, Colorado outside Denver.

“The American consumer doesn’t know how to slow down even with the high price of oil. We’re a consumption-based economy, and it would be almost impossible to slow down the American consumer,” said List.

He also credited factors internal to his company. “A good part of it is hiring the right people and getting the infrastructure in place to get customers and serve their needs. If you do that, the economy is less of a factor,” List said.

“We never had a lot of exposure to mortgage banks. It’s just not one of our specialty niches,” List said. “We have a diversified portfolio of clients and if some layoff because they got caught up in the subprime problem, and they have other divisions where no doubt they’re hiring.”

He too is grappling with the uncertainty over the U.S. economy. “Growth rates might slow next year, but they won’t turn negative. People are just waiting to see how all that talk about a recession winds up,” List said.

“We’re having a killer fourth quarter,” said Todd Palmer, CEO of Diversified Industrial Staffing in Detroit. He pins that success on the nimbleness that comes from not being stuck with large national accounts and going after business under the radar of the staffing giants.

“We have a candidate inventory that we can turn over faster to a wider base of accounts,” he said. “We also focus on skilled trades versus light industrial commodity placement. Our people are more sought after – and the higher the skills, the more people are willing to pay for them.”

Palmer sees the future of industrial staffing in those higher skill sets. “We’re not wasting our time with people we can never hope to place,” he said. “Companies are getting rid of commodity workers. They’re bringing in people who can combine brainpower with an ability work with their hands as opposed to just working with their hands. If you have the right skills, we can get you an interview within two to seven days.”

In addition to that, Palmer noticed none of the seasonal slowdown “that we usually have this time of year.”

A Financial Services Fissure

Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York, is seeing a divide in financial services between the haves and those that have not been stuck with bad subprime paper.

“No matter how bad their losses due to mistakes in subprime, they still need to reward their successful people,” he said. “Boyden is finding that the market for those in mergers and acquisition and wealth management is extremely hot. This contrasts with those in the mortgage business.”

Boyden recruiters “are very bullish” about next year. “We had a record year with 30 percent growth in 2007. We expect the growth to be lower, but very positive in 2008,” Clarke said. “Fortunately, we’re not focused on U.S. residential construction and real estate. But U.S. manufacturing is rebounding on the weaker dollar.”

Also a strengthening global focus will likely soften any impact from a U.S. slowdown. “The U.S. is still a hot market for hiring in the executive suite. U.S. corporations are increasingly global and less dependent on domestic markets,” he said, adding that the global reach is reflected in hiring behavior. “It is no longer necessary to hire a CEO born in the U.S. whether you are Citigroup, McKinsey or the state of California.”

Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing, saw a late December pickup in orders that’s unlikely to be captured by BLS surveyors but portends a good start to 2008.

“December was slow for us on new orders and placements,” she said. “But at the end of the month, orders started flooding in – too late to do anything about it with just four days left. But it means that January should be strong.”

Budgets are being belated released for first-quarter projects, especially from medium-sized banks, local governments and technology companies. Why did they not show up earlier? “Maybe they were too busy buying presents,” Peterson replied.

Peterson feels a little more confident than she did a week ago. “I can’t help but brace a little for a downturn. I was worried when our orders were down in November and earlier in December. But it is picking back up, which relieves a little of my worry,” she said.

Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland, said his business has been steady – and the year in general has been good. But he has been “tremendously distracted” lobbying against a new state law that places a 6% sales tax on computer services. “It appears to apply to any work done or possibly even used in the state of Maryland regardless of the location of the headquarters of the company, which becomes responsible for collecting and filing the tax,” he said. “Other states are watching to see if this cancer will spread or can be stopped.”

Allan Brown, president of Doherty Staffing Solutions in Minneapolis, said December stayed even with November and October, all of which plateaued after a strong September ramp up.

With about half of his business centered on the food processing industry, he would see stability where others might see spikes.

However, he sees two developments that bode well for the near term. “We had our best quarter in direct placement in three years,” he said. “Also I’m hearing rumblings about strong first quarter orders coming from the semi-conductor industry.” Indeed, one chip company put in an order for an additional 50 people starting in January, he said. As such, Brown is not bracing for a downturn. “I just don’t see it,” he said.

Brown is bracing for the possibility of migrant workers going to Mexico for Christmas and not coming back due to homeland security crackdowns. “That hurts companies in low-wage industries,” he said. Companies are “paying more attention” to the issue of undocumented workers – in one case, by raising hourly wages by two dollars.

David Lewis, office manager at two Oklahoma City Express Personnel offices, reports an exceptionally strong December that was nevertheless undermined by wintry weather. “We have experienced a 15 to 20 percent increase in job orders compared to last year,” he said.

The ice storms had a dramatic effect on job placements. “It wasn’t because the job orders weren’t there. What hurt us were the power outages. We lost phones and everything,” he said.

The biggest push came from energy and insurance, with retail flat and manufacturing “just so-so,” Lewis said.

He anticipates “a stable 2008” with some growth – “just not as robust as 2007,” he said. “It might not be a giant leap forward, but we are definitely not taking a step back either.”

Judy Taylor, Express franchisee in Tempe, Arizona, saw a strong increase in orders beginning in mid-November, led by industrial and clerical sectors. Strangely, while job orders were up, average hours were down “considerably” from a year ago.

As Taylor explains it, she is servicing more clients, but the hours per client are about half of what they were last year, largely because of a falloff in manufacturing that is only now beginning to revive.

Taylor is both “hopeful” and “a little apprehensive” about 2008. “I can’t worry about what is going on with the economy. I just have to plow ahead and keep at it,” she said.

Commercial construction hiring also remained brisk through year-end, said Bill Stynetski, president of HardHatJobs in Dallas, an executive search firm. “Historically the fourth quarter has been our best and 2007 was true to form. December has been our best month year to date. Offers are out for 2008, and the year is starting strong with first-quarter job orders,” he said.

Two weeks ago we spoke to Larry, an investment banker who lost his job the prior Friday when his company, embroiled in the subprime debacle, went down for the count. “We survived two credit crunches and a meltdown. Things even started to brighten again in August. But that’s when the rating agencies came down hard. After that, everything seized up,” he said. “We didn’t have a single transaction in six weeks. We survived everything thrown at us except Moody’s.”

The U.S. Department of Labor is scheduled to release employment data for December on Friday, Jan. 4 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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