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Jul 30, 2010
From Mark Marcon at Robert W Baird
Labor Market Slowly Recovering
From Mark Marcon at Robert W Baird - Labor Market Slowly Recovering; Temp Staffing Remains Strong
Labor market stabilizing and slowly recovering; data positive for temp
staffing providers. BLS report was generally consistent with other
recent economic reports and feedback that we received from 18 of the
21 human capital solutions companies that presented at our conference
last week. The labor market is stabilizing and is showing signs of
slow recovery (earlier cycle indicators including layoff
announcements, ISM, etc. more positive than late cycle signs such as
the unemployment rate).
* With a still uncertain environment, companies are increasingly
turning to temp staffing --- virtually every staffing company that
presented at Baird's Business Solutions conference was bullish,
and it is easy to see why with this report.
* On a seasonally adjusted basis, temp staffing added another
47,500 jobs in February. This is the fifth month in a row of
strong gains with 284,000 jobs added in the last five months.
Penetration is now up to 1.6% of the labor force from 1.3% and
on a yoy basis, we are up 4%.
* Expect good Q1 reports from the staffers - this is a positive data
point for most staffing companies (other than health care
staffing) with a domestic focus including RHI, TBI, KFRC, SFN ---
and we believe the trend is global, so MAN and HHGP should also
benefit.
* Overall the employment report was fairly consistent with
expectations - total non-farm payrolls declined by 36,000, pretty
close to the consensus of -68,000 and the private reading from ADP
of -20,000.
* The unemployment rate remained steady at 9.7% -- same as last
month - and better than expectations of 9.8% -- looks like the
household survey is showing that jobs grew in three of the last
four months (including in February) - so small businesses may
finally be hiring (consistent with what PAYX and ASF noted).
* Other notable elements -
* On the positive side: the manufacturing diffusion ratio went
over 50 --- more manufacturing sectors are adding than
shedding jobs. Manufacturing added 1,000 jobs and services
added 42,000 jobs (driven by temps).
* On the negative side: the "U6" unemployment rate increased to
16.8% and budgetary problems are hitting municipal governments
- local governments shed 31,000 jobs.
* Overall -
* Look at the charts throughout this note --- pretty clear that
conditions have stabilized and are showing signs of a slow
recovery with employers turning to temps at a rapid rate to
meet demand given continued uncertainties with regulations and
the sustainability of the recovery.
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