Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Betting on the Temps


Temporary help will help companies get through this jobless recovery.

The Federal Reserve warns that unemployment will remain high for the next few years because the economic recovery won't be strong enough to support significant hiring of full-time workers.

The nation's jobless rate hit 10.2% in October, only the second time since the end of World War II that the rate has reached double digits.

This, obviously, is bad news for the economy. Persistent unemployment, or fear of job loss, will likely keep consumers from spending, which will in turn stifle the recovery because consumer spending totals about two-thirds of gross domestic product. (See also Six Ways We're Stifling the Unemployed)

The US Bureau of Labor Statistics says the number of temporary workers increased by 34,000 in October, the largest gain in two years. This creates a long-term opportunity for investors: temporary employment firms, including Kelly Services (KELYA), Manpower (MAN), Robert Half (RHI), TrueBlue (TBI), and Adecco (AHEXY).

Even before the recession started, the government expected this sector to experience growth.

"The employment services industry, comprising employment placement agencies, temporary help services, and professional employer organizations, is projected to have one of the largest employment increases (between 2006 and 2016)," the US Bureau of Labor Statistics said in a 2007 report. "This industry is expected to add 691,500 jobs and reach an employment level of 4.3 million by 2016."

Researchers spotted the trend after the last recession, which was followed by a jobless recovery, much like the one many economists believe we're currently experiencing. (See also The Decoder: Jobless Recovery)

"Instead of furloughing permanent workers, firms increasingly hire temporary help when they are busiest and then cut back when demand falls," analysts at the Federal Reserve wrote after the last jobless recovery in 2003. "Indeed, firms' use of temporary, or contract, employees to smooth labor needs has grown substantially. In January 1972, the personnel supply industry had only 214,000 jobs; in September 2000, jobs in the industry peaked at 3,965,000. All else equal, this approach yields a smaller permanent workforce, more temporary workers, and more permanent layoffs."

The increased reliance on temporary workers hasn't yet generated steady profits for temporary job placement agencies, but that may be because it's still early in the cycle.

That hasn't deterred investors. Manpower's stock is up about 90% this year, although the shares lost 0.2% to $50.75 each in mid-day trading Wednesday. Excluding charges, the company said third-quarter earnings were $20.5 million, or $0.26 a share. Revenue totaled $4.2 billion, a decline of about 26% from the same period a year ago. Repayment of debt and goodwill charges resulted in a loss of $0.64 a share.
< Previous
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos