NEWS COVERAGE

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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S MAY OUTLOOK

Houston, TX - June 17, 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 May.

Non-Farm Payrolls:
Recruiters: Jobs Plunge Decelerates in May;
Some Stabilization off Lows

• Hiring Highly Splintered Along Regional Lines (Suddenly Bad Times in Atlanta)
• Most Professional Categories Seen Stable; Blue Collar Work Still in Flux
• Investment Banking Dead; Light Industrial in Doldrums; Clerical Moving Sideways

By Gary Rosenberger

NEW YORK (EconoPlay) May 30 – The 2008 jobs swan dive decelerated in May, giving some pause to four consecutive months of grave economic soundings – but it’s not clear whether this represents a reversal of fortune or a random one-month bounce, recruiters say.

Demand for workers was splintered along regional lines – with Atlanta seeing a sudden decline, southern California offering tantalizing hints of a rebound, Texas holding strong on the energy boom, and every other place in line with weak prior months.

By industry, investment banking gave up its ghost, but demand for other professional workers and technicians remained stable, if not improved, and clerical work appeared to take a sideways turn after months of decline.

Anything blue collar stayed weak or became even weaker – with the customary spring ramp up clearly delayed pending evidence that businesses can muddle through declining consumer sentiment, tight credit and inflation.

Any segment exposed to the U.S. consumer – retail included – was skating on thin ice, and early reviews on the economic stimulus package were highly skeptical.

But if views were divided over the direction of job orders, at least they compare favorably to all prior months this year, when the consensus was universally and resoundingly downbeat.

Also recruiters mostly felt the BLS had downplayed job losses in April and any improvement would be against revisions, which they expect will go in a firmly negative direction.

“I’m almost embarrassed to keep saying this. But I’m seeing the same thing week after week. Our sales are flat sequentially, which we take as good news in light of this economy,” said Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets. “I see no pickup, but at least I’m seeing no falloff either. It’s just not moving.”

Last year, he saw “movement” in May with more acceleration into June. “It was edging up. But this year all my numbers are almost exactly the same week after week after week,” he said.

Within that flat landscape the ground is shifting. “We’re down on industrial, but up on professional. Clerical just keeps moving sideways,” he said.

A Slowing Avalanche

“The nosedive is decelerating significantly,” said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California. “Our clerical office support business went up in May, and thank God that it did. It had been a while since I saw a positive number there.”

It could mean “we hit bottom in the markets we’re serving, or it could mean we took an upward bounce only to land in a really deep hole in two weeks time,” Leighton said.

Logistics, manufacturing and distribution continued to decline sequentially but were up 10% from the prior year – a soft showing relative to the 20% to 25% year-over-year gains “that we saw before we hit the skids in February.”

“May has started off stronger then April for us – no great jump, nothing staggering, just gradual sequential growth,” said Tom Bickes, CEO of EmployBridge in Atlanta, specializing in logistics, transportation, specialty manufacturing, finance and accounting, and administration.

“In general our clients are not talking about significant ramp ups for the summer, but not as many are dropping off either,” he added.

“Skilled manufacturing jobs are still in demand and tough to supply, but the logistics sector remains sporadic – up in some markets and down in others,” Bickes said.

But while May would suggest some stabilization on the jobs front, any predictions for a third quarter rebound “may be optimistic,” in his view.

Bickes finds it difficult to weed out any uptick from the economy from “us just working harder to take market share.”

He does take comfort in a recent upturn in orders for truck drivers after a very soft first quarter. “When transportation is healthy the rest of my business usually will pick up, especially in the blue collar world,” Bickes said.

Here, too, it’s not clear whether the improved demand for drivers springs from gains in export industries or from transportation companies looking to flexible labor as they “right-size” in response to a slowing economy and record diesel prices.

Although Bickes sees “improvement” in the labor market, he sees no evidence of “aggressive hiring” by companies – which means he has low expectations for positive job growth when next Friday’s employment data is released. “If there is growth, it would be very slight growth,” he said.

Atlanta Takes a Bad Turn

“My May is down about 15 percent from the January, February, March period,” said Steve Pennington, division president for Global Employment Solutions, stationed in Dalton, Georgia near Atlanta.

He has kept track of seasonal patterns for the last seven years, and May should have been up, not down. “May should have been better than the first quarter. But it got weak across a lot of sectors,” he said.

Pennington’s results have been running counter to the wider national economy. His first quarter was actually impressive – grounded, he believes, on new business and market share gains. “But over the last six to eight weeks we saw a steady slowdown across a lot of sectors,” he said. “When you can’t sell Nissan and Toyota auto parts, what can you sell?”

Very little appears to be going Atlanta’s way right now. Hayes Lemmerz, an aluminum wheel manufacturer in nearby Gainesville, closed a plant earlier this month and moved production to Mexico. The future also looks hazy for Roper Corp., where more than 1,800 workers make ovens for General Electric, which is looking to sell off its appliance division.

Dalton is also the nation’s carpet capital and that business has tanked along with the housing market. High gasoline prices also spell bad times for a local manufacturer of recreational vehicles. Yet another client that supplies tools to big box stores is down.

But other sectors are holding up, like government – and especially Medicaid. Producers of basic consumer goods (a bottle-maker for Gatorade, a Budweiser plant, and a maker of personal care products) are also hiring. And record energy prices have revived the fortunes of a local manufacturer of rail cars for the transportation of coal.

Pennington sees no grounds to credit the stimulus package. “I rarely make sales calls these days, but I was on several important sales calls in the last three weeks and nobody said beans about that.”

Darren Bakay, senior technical recruiting manager for Ajilon-Adecco in Manhattan with clients at several of Wall Street’s investment houses, has given up on that piece of his business for now. “In May there was nothing for us. We saw very little activity.”

But he is more hopeful about June as he turns his attention toward other clients. “We are moving away from investment banking. It’s doing nothing for us right now. We’re moving more into what we call non-IB sectors, which are doing better,” he said.

Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York, is turning his focus outside of the United States to expand his business. “Boyden is up 16 percent year to date (globally). However, there is a general softening in the U.S., where we now expect only a 5 percent increase in our business this year,” he said.

Regions like Texas are showing results for the same reason he gets good results in the Middle East, Australia and any other regions driven by the energy and the agricultural commodity boom.

Elsewhere, his outlook is downcast. “Clearly, financial services and consumer-facing businesses are cutting back and this is now affecting the corporate suite,” Clarke said.

CEOs are telling him they are concerned about the impact of energy and food inflation and the fall in home equity on consumer spending and confidence. Inflation, much of it spurred by the weak dollar, is fanning concerns “about labor disputes and disruptions of manufacturing supply chains,” Clarke said. “There is also concern that in a weak economy there will be less ability to pass on costs through price increases.”

Add to that the difficulty in raising financing and you get “definitely a big weakening in business sentiment. This is sure to feed through to the labor markets through reduced investment, lower volumes, and tighter margins,” Clarke predicts.

“Everything is about the same,” said Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states. He argues that businesses are bogged down by “a very negative psychology” prompted by tightening credit and high oil prices.

“I have friends in a lot of different industries and they’re all saying the same thing – business is flat. There’s been no change over the last two months,” Sigrist said. “People have accepted it and are only hoping it doesn’t get any worse.”

But others, in technical services, saw the hiring spigot open up in recent weeks and even days. Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing, said May was “fairly strong” for information technology and software engineering.

“Orders started pouring in at the end of the month, which bodes well for June,” Peterson said. “We haven’t had any customers backing off from hiring yet.”

Peterson recently attended several industry events that attracted other recruiters and “all complained about the difficulty of sourcing people for their open positions.”

Real Regional Variations

“Overall, I can say that we are seeing real regional variations in how the economy is affecting business,” said Tracy Lynch, external marketing manager at Sapphire Technologies, an I/T staffing firm with 40 U.S. branches, based in Woburn, Massachusetts.

“Some regions like Houston, Austin, Pittsburgh, Los Angeles, Fort Lauderdale, Sacramento and others continue to see steady and even brisk business,” she said. But others like Atlanta, Delaware, DC, and Minneapolis found business had slowed by varying degrees.

May is “still fine – not as good as April, but still solid,” said Mick Siktar, branch manager at Sapphire’s Pittsburgh office. Interestingly, while he hears incessant grousing about the mortgage industry, he recently filled a large perm placement order for a mortgage company.

Pittsburgh, he adds, hasn’t seen the downturn yet and continues to undergo a revival from the old Rust Belt days.

But Travis Reding, branch manager in Atlanta, saw May job orders down by more than 30%. He predicts a slowdown in summer hiring and expects no real boost from the rebate checks. “In our region, all job categories are on the decline. We have not seen any area of consistency within the I/T realm,” he said.

Melissa Elliot, an Express Employment Professionals franchisee in Metairie, Louisiana, reported “an interesting” May. On the one hand, “our office is booming,” Elliot said, noting that New Orleans continues to benefit from Katrina reconstruction.

“I attribute our growth to the rebuilding process” with companies still hiring despite what might be happening to the economy elsewhere, she said.

Shannon Padgett, an Express franchisee in Bradenton, Florida, near St. Petersburg, said May was strong. “We’ve seen an increase in new client activity for seasonal hiring, as well as repeat business,” she said.

Hospitality is up, as are lawn care and landscaping. However, she did see light industrial “slow down considerably.”

Padgett reports her office is being “impacted greatly” by $4 gas. “We’ve cut into our gross margin to give our associates an extra 50 cents (an hour) to help them travel to a job.”

Bill Stynetski of HardHatJobs in Dallas, a recruiter in commercial construction, saw hiring stable on the institutional side (hospitals and schools) – but a decline for any industry exposed to U.S. consumers, specifically shopping centers.

Daniel Conroy of Michael Latas & Associates, another executive search firm specializing in commercial construction in St. Louis, reported a wider drop in commercial construction hiring from preceding months – with the lack of financing a major stumbling block for new projects.

Greg Palmer, CEO of Palmer Consulting and the former CEO of Remedy Staffing, saw little change from a month ago, with perhaps “some more gradual slowing.” But he also spots “hot” areas in export industries, education and government, and a burgeoning bankruptcy industry.

“Things are fine,” said an executive for a staffing firm with a national exposure to finance and technology. His run rate actually saw an impressive spike in the final week of May.

While the source cautioned about reading anything into a single week, he feels conditions are surprisingly stable given oil prices and tight credit. “Our business is not growing to the degree I would like for it to grow, but at least it’s stable,” he said.

“I think the secular part of the story is being grossly underappreciated. The skilled areas that we staff, in finance and technology, hasn’t gotten the email about bad times. Skills are in short supply, and people have not yet capitulated on their businesses,” the executive said.

“We’re not oblivious to $4 gasoline and the hit the American consumer is taking, but we are not taking the hit. Secular drivers are counterbalancing any cyclical instability,” he said, defining the secular drivers to include baby boom retirements and chronic skill shortages.

His clients appear to be more concerned about losing critical employees that they would only have to replace at enormous cost when the upturn eventually occurs. “There is a reticence to layoff and rebuild,” he said.

Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland, said his government clients are “very active” and “our financial clients are very quiet.”

He doesn’t harbor much hope for the stimulus package. Indeed, his own rebate check has not arrived in the mail yet.

The U.S. Department of Labor is scheduled to release employment data for May on Friday, June 3 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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