NEWS COVERAGE
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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S MARCH OUTLOOK
Houston, TX - March 28, 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 March.
Non-Farm Payrolls:
Recruiters: Job Losses Drag On in March; "It Feels Like Recession"
- A Small Uptick from February, But Year Ago Comps Take an Ugly Turn
- Bear Stearns Meltdown Echoes Into Places Once Thought to be Unrelated
- Accounting and Finance, Information Technology Get a Late March Boost
By Gary Rosenberger
NEW YORK (EconoPlay) March 28 – Jobs continued to evaporate in March as economic wildfires spread beyond Wall Street, prompting companies to postpone new projects and put aside expansion plans pending any sign of a new dawn, staffing executives say.
Some saw slight sequential increases in job orders and placements from a bad February, but this spring’s jobs ramp up has the hallmarks of recession – and year-ago comps have turned ugly.
Commercial construction employment – a very slow ship to turn in any economic tide – has begun to erode as tight lending conditions imperil projects that have yet to break ground.
Accounting and finance and information technology were on a very tight wire as the crisis on Wall Street deepened. But a burst of hiring erupted in late March – mostly, some think, having to do with post-credit crunch clean-up work.
Other positive stirrings emanated from government pump-priming ahead of the November elections, new plant investment by foreign manufacturers and export growth founded on a swan-diving dollar. Employers are also heavily engaged in replacing retiring boomers, essentially a zero-sum game.
The speed and ferocity of the collapse of Bear Stearns seemed to spook a number of recruiters who previously thought they had no connection to Wall Street.
"Boom! It's Falling"
”Our numbers are starting to go negative,” said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California. “I think it’s the media, the price of gas, Bear Stearns – the fact that everything is so negative.”
Twenty or so consecutive months of positive year-over-year comps ended in March. “Now I’m looking at negative double digits. Boom! It’s falling, and it’s starting to show up in our numbers,” Leighton said.
Accounting and finance is a lone holdout as other white-collar jobs vanish. Logistics, another mainstay of his business, also has come under pressure, he said.
Leighton is dubious about May’s rebate checks. “They’ll obviously give a little boost to consumer spending. But whether that translates to business to business spending is another matter. Business to business is a whole different animal. Businesses are cautious right now because they really can’t see where this is going,” he said.
His focus is on Wall Street in ways that it never was before. “There are a lot of businesses, like ours, that couldn’t be further removed from Bear Stearns – and yet we feel this is bound to filter down to places far away from Manhattan,” he said.
“Our year-to-year comparisons were worse, and sequentially we were up just barely from February,” said Tom Bickes, CEO of EmployBridge in Atlanta, specializing in logistics, transportation, specialty manufacturing, finance and accounting, and administration.
The only good news he derives from March is that “at least we stopped declining,” Bickes said, adding, “We know we’re sailing against headwinds on comps.”
Pay rates are caught between workers clamoring for cost of living increases and job insecurities that keep any complaints at bay. “Everything in our industry is acting and feeling recessionary,” Bickes said. “There was some positive news in March with existing home sales. So hopefully we’re hitting bottom, and we won’t see the continued pile-on from housing.”
“If there is anything positive about March, it’s that once again we have not seen it slide further,” said Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states. “It just continues to maintain at these lower levels. Sure I’d like to see things better than they are, but I’m not disappointed.”
His temp-to-perm and direct hire business is actually running ahead of last year. “It’s a very small part of the business, but it shows me that companies still want good people,” Sigrist said.
They might be also motivated to replace workers who retired or took buyouts. “Maybe they figure they just got rid of one person they were paying $100,000, and they’ll get another perm to do the same work for $40,000,” he said.
“I’m very flat sequentially, but I’m losing ground versus the prior year,” said Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets nationwide.
“I’m not seeing any less demand from January and February, but I’m also not seeing the kind of pickup I normally get in March,” he said. “Part of me says be happy – at least you’re not declining and it doesn’t look like a deep recession.”
Drexel expects little from those rebate checks. “We’re a couple of stages away from that. No one will spend their rebate check on temporary help,” he quipped.
He does like specialty and export manufacturing, pointing to a maker of sonar equipment as a success story in turbulent times. “It’s the folks that are only focused on domestic manufacturing that I see disappearing. Folks making wooden bats left years ago,” he said.
A Late March Surge
After many quiet weeks, Darren Bakay, senior technical recruiting manager for Ajilon-Adecco in Manhattan with many clients on Wall Street, saw business suddenly pick up the day after Bear Stearns was swallowed up.
“There’s still work that needs to get done. I’m seeing some project work opening up. Stuff is beginning to trickle in. There’s a lot of revamping happening,” he said. At the same time, he is seeing “layoffs from clients as they lose funding for projects.”
Hinda Dabney, an I/T consultant in Charlotte, also noticed her phones ringing since last week. “Headhunters are calling me and that hasn’t happened in a long time. They’re looking for people who can tell companies what they’re doing wrong and how they can turn things around,” she said. “It’s like another 9/11 the way the Bear Stearns thing is shaking everything up.”
After 9/11, I/T workers found themselves in sudden demand to rig up back-up systems in the event of more terrorism attacks. “Today, they want new systems to avoid everything that went wrong with the credit market,” Dabney said. “They want to see the ins and outs of cash flows. They want to know how much of everything they have and where everything is.”
A national firm specializing in finance and accounting saw only a mild decline even with the turmoil on Wall Street. “The market remains structurally intact in high-demand, specialty skill areas. If you flew down in a flying saucer without ever having read The New York Times, and looked at our books, you would never think the world is coming to an end,” the source said.
But he does see his clients elongating the hiring process. “Last year we would have two candidates and they would choose one. Now they want to see one more and one more after that. That’s slowing the momentum a little bit,” he said.
Demand from energy, healthcare and government remains firm. “They’re not in pain,” he said. “But if your client footprint is in New York City financial services, you’re probably screwed.”
Yet the vultures are descending on Wall Street, ready to feed on the carcass of Bear Stearns. “How many lawyers and accountants are going to live off Bear Stearns in the next five years? Just think of the forensic accounting work that Bear Stearns will require,” he said. “To a degree, tumult is a friend of the business.”
Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing, saw orders and placements bounce back from February but still down from a year ago. Orders primarily came from the government sector – but there was good follow-through from high-tech companies, boding well for placements in April, she said.
Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland, said job requisitions were flat in March, but at least they held steady. “I am getting some concerns on fuel prices. My internal folks want to telecommute. I am thinking about it,” he said.
It's Slow Torture
“The news has gotten so bad, it’s talking everyone into cutting back,” said Tim Doherty, CEO of the Doherty Employment Group in Bloomington, Minnesota.
“Just when you start to feel good about something, more bad news surfaces,” he added. “Are the banks still hiding something? Is there another Bear Stearns out there? It’s slow torture.”
Doherty was running well ahead of 2008 through February, but by the end of March he was running even. “It means that, for us, things have slowed down in the last four to five weeks,” he said. “We are hunkering down and waiting for things to turn.”
Companies continue to invest in future management with an eye toward replacing retiring baby boomers – and Doherty has seen a spate of perm hiring for middle-income production managers and supervisors, in the $40,000 to $60,000 scale. “I’m also seeing strong demand at $80,000 to 150,000, including multiple offers, which is not typical for a recession. It’s a puzzle.”
Clients geared toward the export market, including one maker of electronics components, remain strong. But Doherty sees a slackening in hospitality. “The Midwest doesn’t benefit from the cheap dollar in attracting foreign travelers the way that both coasts do. People in the Midwest have reduced leisure travel dramatically,” he said.
“Strangely, the executive search industry for North America as a whole had another good month except in financial services, where there is a definite slowdown,” said Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York.
Boyden is up 15% in North America and up 20% globally in the first quarter. “Last year was an all-time record, so this is real progress. It means that U.S. firms are changing CEOs, thus generating demand for our services,” Clarke said.
CEOs tell Clarke they’re still planning for growth once they get past what they optimistically refer to as a short recession. “The panic on Wall Street is a worry to Main Street but has not yet caused serious cutbacks in plans for growth – excepting for housing and the financial sector,” he said.
Daniel Conroy of Michael Latas & Associates, an executive search firm specializing in commercial construction in St. Louis, said his business “feels different” these days. “People are a lot less likely to bring in extra staff. We’re doing a lot of replacement stuff,” he said.
“A lot of commercial projects are having a hell of a time getting financing. We won’t see the spec office buildings that we saw in the past. The banks are holding up projects,” he said.
One client, a builder of Target, Wal-Mart and Kohl’s stores, “is less aggressive in hiring than he was six months ago,” Conroy said. “Those tend to be anchor stores, and when those don’t get built, there go a lot of ancillary stores. The retail business is at a standstill.”
Commercial construction is “definitely in a down period from where it was, but it’s still good,” he said. “Maybe we’re just returning to normal times after a 10-year run. We’re certainly looking at recession, but we remain busy.”
“The sequential declines are beginning to accelerate,” said Greg Palmer, CEO of G. Palmer & Associates, a staffing industry consultancy in Orange County. “It was slowly trending down in the prior two quarters, just a modest drifting. But that’s turned into a sharp decline as we moved from the first to the second quarter,” he said.
“The real question is how long will this last, and whether the stimulus package, the rebate checks and Fed monetary policy will help the second half of the year. I can’t tell you what’s going to happen because we’re in such uncharted territory,” Palmer said.
Chris Ashcraft, an Express Employment Professionals franchisee in Mobile, Alabama, reported “a breakout month” driven by government spending and foreign investment, noting local companies are concerned about losing workers to the new ThyssenKrupp steel mill, the EADS/Northrop refueling tanker project, and an expanding shipyard.
“Workers have increased their wage demands and employers are caving in because they are trying to retain them,” Ashcraft said, adding that Mobile already looks recession-proof and those tax rebate checks are just around the corner.
The sluggish housing market is having a direct impact on one of the more mobile segments of the workforce, I/T professionals, who find it difficult to relocate when they can’t sell their house, according to a number of executives at Sapphire Technologies, an I/T staffing firm with 40 branches in the U.S., based in Woburn, Massachusetts.
“The real-estate decline means there is no such thing as an easy move anymore,” said Jessica Schaaf, a recruiting manager in Parsippany, New Jersey. Prospects “are turning down relocations because they don’t want to sell their homes at a loss.”
Jeff Busby, branch manger in Greenville, South Carolina, said he benefits from a population influx. “However, the real estate woes of other regions have had some impact here,” he said. “Many candidates in other regions do have concerns over whether they can sell their homes to move here in a timely fashion.”
But if an area is distressed enough, technology professionals seem willing to just abandon it in favor of greener pastures, he added.
In Durham, North Carolina, a high-tech center, some workers also appear reluctant to relocate because they’re unable to sell their old home, said Debra Reed, who manages the local Sapphire office. “I would term it a mild problem. Some companies offer unbelievable relocation packages to encourage a candidate that they feel very strongly about – sometimes purchasing their home.”
March struck her as a slow month inside of a slow year. “We have not had a single direct hire placement this year,” she said. “Employers are very cautious, trying to make do with what they have, and not replacing contractors when they leave for whatever reason.”
Housing also hurts financial services companies that run credit card operations in Wilmington, Delaware, according to branch manager Luke Walker. The credit card business remains strong, “but the banks themselves are not doing so well” – and Walker counts “at least a dozen deals” that fell apart because of pullbacks in corporate spending.
Steve Soares, branch manager at Sapphire’s El Segundo, California office, said workers who lost jobs in homebuilding and mortgage services found new opportunities in other industries. “Overall, it’s still a strong I/T job market,” he said.
Adam Bilinski, the New York City branch manager, faces a growing reluctance by foreigners to relocate to the United States, with the sunken dollar complicating compensation.
Chris White, branch manager in Portland, Maine, said March was an improvement from February but still disappointing. “Employers seem to be moving slower and are less likely to pull the trigger,” he said.
Chris Mader, national accounts director at Sapphire Technologies termed March an “extremely busy month” with job orders and placements up year over year and from the month prior. “The only vertical market that has slowed has been the financial/banking sector,” he said.
Sacramento branch manager Erik Fleischman also described a late March surge in I/T demand. “March was a very strong month for our office. Last week, ironically, was our biggest week, as far as deals go,” he said. “I think the I/T economy has been fine, the housing market, not so much. The good thing is we're NOT in mortgage. I am happy that, with all the recession talk, our business is still forging forward.”
Mick Siktar, branch manager in Pittsburgh, also had a “great” month. “The economy is fine in Pittsburgh. But Pittsburgh is usually behind the times, so I’m sure tougher times will eventually hit us,” he said.
The U.S. Department of Labor is scheduled to release employment data for March on Friday, April 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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