NEWS COVERAGE

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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S JUNE OUTLOOK

Houston, TX - June 26, 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 June.

Non-Farm Payrolls:
Staffing Execs: No Jobs Recovery in June and No Boost from Stimulus Package

• Wage Squeeze Begins as Employers Grapple with Fuel and Transportation Costs
• Recession or No Recession, a Protracted Jobs Slump Now Anticipated By Most
• As Financial Services, Blue Collar Jobs Hemorrhage, Gov’t Hiring Masks the Pain

By Gary Rosenberger

NEW YORK (EconoPlay) June 26 – The job market took another dive in June as workers spurned offers involving too much drive time and all the efforts by politicians and central bankers failed to revitalize the confidence of employers, recruiters say.

Reviews on the stimulus package came in neutral to negative, with some suspecting a jobs drain from rebate checks being spent on family vacations and other detours from the job hunt.

Employers are now leaning on labor to offset ruinous fuel and transportation costs, leaving workers to dig deeper into debt as they watch the costs of their most basic needs skyrocket.

The seasonal ramp up is being characterized as sub-par, and expectations now are for a protracted jobs slump, recession or no recession – or however one chooses to define a recession.

And while job losses mount in financial services, consumer, and blue-collar segments, government hiring in June – plus residual strength in healthcare and education – could mask some of the stench emanating from the ailing private sector.

“We’re seeing none of the seasonal pickup that we would anticipate this time of year,” said Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets. “June was just another continuation of a soft period. We’re trending sideways.”

Drexel now looks to a more distant horizon for a recovery. “People can argue whether this is a recession or not, but folks are now taking a deep breath and preparing for a long dry spell,” he said.

He sees no impact from the stimulus package as yet. “We wouldn’t be a direct beneficiary. There might be a secondary influence, but it hasn’t reached us yet,” he said.

‘It Feels Recessionary’

“We saw a little bit of upturn everywhere, but it’s not dramatically up from May,” said Tom Bickes, CEO of EmployBridge in Atlanta, specializing in logistics, transportation, specialty manufacturing, finance and accounting, and administration.

“The takeaway from our business for June is that we saw some sequential growth and it was one of our better months this year. But we’re not seeing the past levels of seasonal growth,” he said. “It feels very recessionary.”

Labor availability remains tight, all the more at higher skill sets. “The difficulty in recruiting is the biggest difference between what we see today and what we saw in past challenging environments,” Bickes said, noting that skilled workers are now retiring at a faster clip than the market’s ability to replace them.

The refund checks are a non-issue for him as well. “They are such a one-time hit. Maybe it’s having some trickle effect on the economy, but it’s hard for me to judge,” Bickes said.

More encouraging to him are low inventories, which could catapult job growth when the eventual upturn arrives. He also observed a counterintuitive increase in demand from trucking companies, despite average national diesel fuel prices closing in on $5.00 a gallon.

Food inflation might be the bigger threat. “I just paid $6.50 for a gallon of Mayfield milk. When the price of milk is that much higher than a gallon of gasoline, you have a real problem. It makes me think about what $10 temps are going through, and it makes me sick at heart,” he said.

“In Ohio, manufacturing has definitely slowed. We also saw a slowdown from finance and banking that came in faster than we had expected,” said John Owens, president of PSI Group in Cincinnati, specializing in technology staffing in Ohio, Indiana, Kentucky and the Carolinas.

But with offsetting orders from software companies in the Carolinas, “June came in relatively flat for us,” Owens said.

He views the economic stimulus package as a non-starter for jobs. “We think it could even negatively impact job growth because as people get their rebate money, they’ll spend it on a vacation, take time off, and delay looking for work,” he said.

Overriding any stimulus action is the inexorable march toward $5.00 gasoline. One client, a major grocery chain with a data center in Ohio, is “putting the squeeze on all its vendors, us included, to offset what they pay for trucking and distribution,” Owens noted.

But there is a limit to the amount of punishment workers will take when the cost of necessities is soaring. “Availability of labor is still very tight. Some of our clients are slow to understand that fact, which creates a lot of fall-off,” Owens said. Furthermore, workers are turning down postings that are too far from home, “which shrinks my candidate pool.”

More Applicants, Fewer Jobs

“Have we seen a surge in resumes? Of course. There are an awful lot of people losing their jobs who are coming to us,” said Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states.

But there are fewer jobs for the taking and “our temp-to-perm and direct-hire orders are much lower than they were last year,” he said. “Our business, even though it’s mostly temp, correlates to people looking for full-time jobs – and there are not as many temp jobs available to connect people to full-time work.”

He has found ways to fight back. “We’re more flexible in what kinds of orders we fill. We are traditionally administration, but we’ve departed from that,” Sigrist said. He now takes orders at risk for workmen’s comp, which he assiduously avoided in the past. “We still don’t do forklift drivers, but we will do light assembly,” Sigrist said.

“I don’t think there’s as much demand out there. Recruiting has gotten a lot easier,” said Scott Leighton, controller at Helpmates Staffing Services in Irvine, California. “The pendulum has swung the other way and now the challenge is in finding orders to fill.”

Demand is down from a year ago but is being tempered by a sequential uptick from April to May and into June – “so maybe April was the bottom,” Leighton said with little conviction.

In May he tweaked out a sequential increase of 1%, and June was up another 5%. “But we’re down from a year ago, particularly in office support where the decrease is double digits,” he said.

It’s hard to see how those sequential increases will continue. “You have to believe economic activity will slow with gasoline prices where they are. That’s got to be killing everybody,” Leighton said.

Layoffs and job insecurities are also now a fact of life in the executive suite, said Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York “Since the start of the year, my mailbox has received an increasing number of unsolicited e-mails from those recently unemployed and those expecting to be so. The first wave was heavily loaded with those in the construction, real estate and financial services sectors,” he said.

Six months later, those industries now represent just 50% of the current crop of job-seekers with the rest spread out in an indeterminate fashion, he said.

Still, this downturn compares favorably against the “catastrophic” dotcom meltdown that was quickly followed by the 9/11 terrorist attacks. “There is concern about the future of the economy, but not panic,” Clarke said.

Mike Ziman, president of Global Commerce & Information, an I/T consulting and staffing firm in Columbia, Maryland, is taking advantage of opportunities presented by a higher jobless rate. “We seem to have a less difficult time in finding qualified candidates, and this has helped us grow this year.” Ziman described his June orders as “moderate” and “steady.”

Fuel prices seem to be a bigger influence on the jobs economy than the stimulus package. He recently implemented a “work from home one day a week” program for in-house staff in the hope that savings in travel costs will help with worker retention.

Government Hiring Spurt Spotted

Marjie Peterson, president of Macrostaff in Bellevue, Washington, also specializing in I/T staffing, saw “a lot of placement” in June. “It was a big month for us,” she said. “It was the biggest month this year in getting people started – and more orders have begun to trickle in at the end of the month.”

The month began with new orders down 20%, but the late June spurt brings her closer to prior months’ ranges – and bodes well for July.

Availability of labor is largely driven by layoffs at Washington Mutual – and the brunt of her new orders (a whopping 75%) comes from government, she said.

Gas prices should be a jobs dampener going forward. “Companies will lose people unwilling to suffer a long commute,” she predicts. “My own employees are already complaining.”

Greg Palmer, CEO of the consultancy G. Palmer & Associates and former CEO of Remedy Staffing, sees the primary employment drag coming from less-educated workers. “Hiring is still very tight in the higher skills and wages are still going up, surprisingly,” he said.

But there’s not one blue-collar client of his that didn’t see a big drop back in April. “I’ve heard over and over again that April was the worst month in unadjusted terms this year,” he said.

But if May and June look better, “when the seasonal adjustments are made, it’s still very soft,” Palmer said. “It’s just a steady decline, which is different from past recessions when we would see those big monthly drops.”

Darren Bakay, senior technical recruiting manager for Ajilon-Adecco in Manhattan with clients on Wall Street, sees the jobs hemorrhage spiking in financial services – and is turning his focus to advertising and entertainment to offset the risk from banking.

Financial services orders now come “in dribs and drabs” and “are not enough for us to feed on,” Bakay said. The best he could say for June was that it was not his worst month this year.

As Citigroup and Bear Stearns grab the layoff headlines, one Bank of America insider told us that every technology contractor will be “gone by the end of June” to make way for the Countrywide acquisition.

An executive for a staffing firm in finance and technology saw a flat June. “It shouldn’t be flat, but it is. Maybe a better word to use is stable,” the source said.

He is not paying attention to the rebate checks. “It’s hard to see why any job order would be placed just because a $600 check appears in someone’s mail box,” he said.

Construction, Technology Slide

“There’s still demand for civil contractors, but any new construction related to the consumer – from shopping malls to hotels – is being put on the backburner,” said Bill Stynetski of HardHatJobs in Dallas, a recruiter in commercial construction.

There are offsetting exceptions in healthcare and university work, which benefit from an aging population and echo boomers entering college. Another demographic shift, young graduates and foreclosure victims looking for a place to live is also a spur for apartment projects.

Oil and gas projects are also riding high – but with the rest of the domestic economy eroding, Stynetski sees construction firms redoubling their interest in foreign work.

“We are seeing more resumes from good talent,” said Daniel Conroy of Michael Latas & Associates in St. Louis, also specializing in commercial construction executive search.

“Commercial construction is flat pretty much all over,” he said. “Although most of our clients maintain healthy backlogs, much new work is dragging because of financial and economic concerns. Companies are much more selective about who they bring on than they were a year ago.”

Sapphire Technologies, an I/T staffing firm with 40 U.S. branches, saw consistent signs of weakness across the nation in June. “We are seeing resumes coming from companies that have recently had layoffs, specifically business services, banking and financial, and wireless and broadband communications,” said Carla Hand, Sapphire branch manager in Fort Lauderdale.

She saw one large retail client offering “early retirement packages” for perm employees while also cutting I/T projects.

Fuel costs also now affect how her clients conduct business. Many are in cost-cutting mode with hiring freezes, reverse auctions for goods and services, and cross-training employees for open positions in lieu of replacing departed workers, she said.

“We have seen a slight increase in the number of people contacting us looking for a job,” said Luke Walker, Wilmington branch manager. He said candidates are “starting to accept a little less” even as the cost of commuting becomes “a major factor in rate negotiations now.”

“Projects are being put on hold or scaled back,” said Boston branch manager Terrence O’Leary. “The result isn't a loss of headcount as much as doing more with the same resources.”

“Job orders in June have been down for our market by a large amount,” said Robert Conder, sales manager in Charlotte. “This is primarily due to the weak financial sector and the decline in earnings from our top clients.”

Jobs orders also slowed in nearby Durham, said branch manager Debra Reed. One auto parts manufacturer advised local staffing agencies it would no longer use contract workers for the remainder of 2008, blaming high gas prices for the increased use of mass transit and thus “less maintenance and repair work.”

“Organizations in Northern Virginia are laying off people in the thousands,” complained Erick Zohn, DC Metro branch manager. “Most of what we get is the leftovers after most work has been off-shored.”

“Technically speaking, we are maintaining the number of open jobs we have year on year, but we probably have twice as many clients and the average client is not hiring at the same pace as last year,” noted Adam Bilinski, New York branch manager. The drubbing in financial services has also shifted negotiating power “back to the employer.”

Rachel Davis, Houston branch manager, has seen technology layoffs related to home mortgages and housing, but job orders continue to outpace the nation thanks to the energy boom.

Todd Palmer, CEO of Diversified Staffing in Detroit, said the calendar should soften the blow from auto layoffs – with June and July the time of year when factories shut down anyway for retooling. But he is running into a broader issue of employers looking to underpay talent.

“Instead of paying the going rate of $18 to $25 for skills, they want to pay $14 an hour, not understanding that the availability for the kinds of workers they want is still tight,” he said.

One company has idled a machine that generates $1,000 of product a day rather than pay what the machine operator is worth. “There’s no explaining economic stupidity,” he said.

The U.S. Department of Labor is scheduled to release employment data for June on Thursday, July 3 at 8:30 a.m. ET.

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