NEWS COVERAGE

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STEVEN DREXEL WEIGHS IN
ON ECONOPLAY'S SEPTEMBER OUTLOOK

Houston, TX - September 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 September.

Non-Farm Payrolls:
Recruiters: A Mild Ramp-Up Stanches September Job Losses

• Only Mild Aftershocks from Wall Street Tumult, Little Immediate Impact on Jobs
• Hurricane Ike a Drag for Sept Payrolls; But Might Provide an Unintended Jobs Dynamo
• Limited BLS Survey Window Could Skew September Payrolls to the Upside

By Gary Rosenberger

NEW YORK (EconoPlay) Sept. 26 – September payrolls showed surprising resiliency in the face of the conflagration on Wall Street and a mighty hurricane in Texas – as a belated seasonal ramp-up slowed the jobs seepage that was threatening to overflow, recruiters say.

Wall Street’s meltdown had a wide psychological reach, slowing hiring decisions in far-flung places, but little more so far. No one outside New York, or even inside New York, suggested an immediate jobs bloodbath from it.

Hurricane Ike and its remnants plunged southeast Texas and a host of Midwestern cities into darkness for days and even weeks. But a temporary surge of orders from insurance companies, charities and others involved in repair and recovery work cushioned some of that blow – and could provide a jobs dynamo for months to come.

The month’s two disasters occurred at the tail end, even outside, of the BLS’s survey window and could skew preliminary data for September to the upside by not providing a full accounting. Even so, an upside surprise won’t necessarily constitute a “false positive” reading because employers are not seen panicking over either of these natural and man-made disasters.

“September was not worse but not much better than August. It’s showing signs of sequential growth,” said Tom Bickes, CEO of EmployBridge in Atlanta, specializing in logistics, transportation, specialty manufacturing, finance and accounting, and administration.

That statement comes with a caveat. “Eight percent of our business is in Houston, and Hurricane Ike played havoc with our year-to-year comps,” Bickes said. “The only way I can try to make sense of my numbers is to take Houston out of the equation.”

But natural disasters also have a way of producing jobs – and Ike is no exception. “There should be some positive offset for anyone providing hurricane relief products and services. They will have to rebuild a lot of Houston,” he said. (Ike’s reach extended into other states, shutting down power at EmployBridge’s Louisville, Kentucky office for two days.)

But Ike is a far cry from the endless, bungled recovery work that plagued New Orleans post-Katrina and that forced companies to move away. “As our manufacturing clients come back on-line, demand for labor will be heavy because they’ll have a lot of catching up to do,” Bickes said.

Wall Street was less of an issue. Bickes felt no echoes beyond the credit crunch already firmly in place. “I’m not seeing it impact our clients except in the way that it creates a significant air of uncertainty,” he said. The pressure he felt from housing and automotive was worse – “and even that’s pretty much flushed through the system. Overall, we didn’t feel Wall Street, no.”

More Tales of Two Disasters

Steve Drexel, CEO of Corestaff Services in Houston, with more than 100 branches in most metropolitan markets, was an eyewitness to Ike’s depredations. “Our Houston branches probably lost a whole week,” he said. “Things are still not back to normal. There are 12,000 traffic lights that still aren’t functioning. Some schools are still out. I don’t have power in my own home.”

Drexel saw a “temporary drop” in employment in Houston, but expects the city to come back “stronger than ever” as the recovery proceeds and companies begin to make up for lost work in October and November.

The timing of Ike, which made landfall on Sept. 13, probably means the BLS won’t provide a full accounting of its impact on employment data – not even to mention the demise of Lehman Bros. and Merrill Lynch two days later, he said.

In that financial collapse, he sees opportunity. Bank of America faces huge integration issues after gulping down Merrill Lynch and Countrywide – same with JPMorgan swallowing up Bear Stearns and Washington Mutual, and Barclay’s absorbing Lehman Bros. “Whenever you see a merger, you have layoffs in one location and in another location there’s extra work,” he said.

With all that, September still felt like “another flat month, overall,” Drexel said. “Other than some new clients coming on, I’m not seeing any lift at all.”

He worries about media and political fear-mongering that likens today to 1929. “It effectively pushes out the recovery to late 2009 or 2010,” he said. “If people think the recovery is coming later, they’ll batten down even more, and that means more delays in hiring and spending.”

No Bloodbath, Just Tough Times

“We’re not seeing a bloodbath, but we’re not where I thought we would be nine months ago when I put a budget together on a piece of paper,” said Steven List, chief operating officer at Global Employment Solutions, a national provider of professional and commercial staffing services in Lone Tree outside Denver.

“Perm is looking pretty bad. It’s slowed down in a lot of our markets, and it’s tough to get clients to commit,” List said. “Clients go through the trouble of interviewing and then say, ‘maybe not right now.’ The last really good month for professional perm was June. July was down a little, but by mid-August it was down substantially.”

The temp side is “holding up okay”, all things considered – and professional temp is “holding steady but not where we want it to be,” he added. “Light industrial temp is slow and steady, but with an increasing amount of uncertainty.”

Factories are finding ways to reduce hours without eliminating employees. “They’ll close at 12 noon on Friday to extend the weekend or they’ll close for a day to do ‘inventory,’” he said.

There are competing forces tugging at temp hiring. “Usually, when the economy comes off its peak, we expect more temp business. But the same places that downsize tend to unload temps before they cut to the bone and reduce permanent staff,” he said.

The Wall Street fallout has been minimal so far, but List is bracing for more. “If investment banks are doing fewer deals, they also need fewer lawyers and I/T staff. There will be some downstream effects, but it hasn’t worked its way down the system yet,” he said.

A New York recruiter saw dissonance between the scary headlines and workaday business. “We’re okay. We haven’t seen the effects of what’s going on just yet,” said Darren Bakay, senior technical recruiting manager for Ajilon-Adecco in Manhattan.

“Overall, the whole year has been an off-year. But compared to the previous months, September is much the same,” he said. “Orders are down, but what happened this month didn’t affect us tremendously. We still see some projects going through and no one is cancelling.”

He, too, expects the laws of unintended consequences to bring work from the big banks. “There will be layoffs, but there could also be an increase in hiring to integrate systems, and that’s good for technology people,” Bakay said.

He didn’t see resumes flow in when Fannie Mae and Freddie Mac went into receivership. “But we did see a lot of resumes from Lehman and Merrill this month,” he added.

Others saw an ill wind blow. “New orders stopped cold before mid-month,” said Marjie Peterson, president of Macrostaff in Bellevue, Washington, specializing in I/T staffing.

“We’re still filling orders that came in before September, which formed a fairly deep pipeline, but this portends a very quiet fourth quarter,” she said. “I think everyone’s holding their breath. It’s business as usual for projects and positions that are already approved and funded. But everyone’s waiting to see what happens next before starting anything new.”

Little Changed, or Lasting Repercussions?

“This last week was scary, but our business is going to be exactly like it was the last three or four months – slow,” said Charles Sigrist, president of Stivers Staffing Services in Chicago, with 30 branches in 12 states.

“People look at their 401Ks and stop spending. That’s not a good thing for the economy,” he said. “I don’t see companies hiring in a major way. They just want to be conservative and bring their costs down. I really believe it’ll be next year before it turns around.”

The credit meltdown “affects all types of businesses. I talked to a number of my friends in my industry across the country, and they’re all affected,” Sigrist said. “But the job market did this in 1981, 1991 and 2001. People say this is the worst thing ever, but they have short memories.”

“The implosion of the financial system last week will have long-lasting and important impacts on demand for executives. Most of these will be negative in the short term,” said Chris Clarke, president of Boyden Global Executive Search in Hawthorne, New York.

“Teams of highly paid top investment bankers are already looking for new homes. Some clients are talking directly with these teams rather than using their normal search firms,” he added. “The drying up of credit is going to further impact consumer spending, as will the higher taxes to pay for the rescue plans. This will reduce demand for all labor in the wider market as well as for senior executives.”

Boyden’s Houston office stayed open through Ike. “Fortunately, we had just set up an emergency plan to allow them to communicate from any active computer. Houston is a boom town for search because of all the oil money flowing through,” Clarke said. “They kept on working and had a good month so far.”

Scott Leighton, controller at Helpmates Staffing Services in Irvine, California, said September was “a slight improvement” over August but was still weak. “It improved a little, but there’s not much time left for the Christmas season. It makes me nervous about Christmas. It makes me think it will be a pretty bad Christmas season for retailers,” he said.

Leighton doesn’t see southern California escaping the Wall Street meltdown. “Everybody is scared, just like we are,” he said. “Nobody knows where this is going. Nobody wants to commit to anything. Whatever uncertainty we had before this, you can double it now.”

Things have turned upside down. “Recruiting is a breeze, but there are no openings. A year ago we were sweating bullets over recruiting. The market really changed,” he said.

If panic on Wall Street spells an ugly fourth quarter, Hurricane Ike took some of the edge off. “There was demand from call centers to deal with insurance issues. You can’t put up a call center in the middle of a hurricane zone, but you can in California. We did see a ramp-up, just not in the areas affected,” Leighton said.

A Belated Seasonal Ramp-Up

Allan Brown, president of Doherty Staffing Solutions in Minneapolis, specializing in light industrial and manufacturing, felt no reverberations from the Wall Street blowout on the manufacturing sector, “which now seems on track for a decent seasonal ramp-up again.”

Projections are now “very strong” for one internet retailer on his client list. “The traditional fall ramp-up just started later,” he said. “I would prefer to be stronger than I am. Most of our growth is not new business as much as it’s taking business away from the competition, so it might not be about the economy for us.”

Wall Street “didn’t affect me all that much. Manufacturing isn’t seeing it,” Brown said. “But for those who were on shaky ground, this might take them over the edge.”

One signal of tough times is that credit collection is getting tight. “I see creditors demanding money quicker. We, too, are more stringent on credit collection and getting paid now. But I’m the one on the hook for payments and taxes,” he said.

Brown thinks he can weather the turmoil and finish with an up year. “Fifty percent of our business is in food, and that’s pretty stable,” he said.

Greg Palmer, CEO of the consultancy G. Palmer & Associates and former CEO of Remedy Staffing, sees payrolls “lower and trending lower” for the month. “All the concern on Wall Street is spilling to Main Street in terms of slow hiring and job losses.”

But he also sees potential for upside after (and if) the $700 billion in bailout money begins to circulate through the economy. “When the S&L industry went bust the government created the RTC and lots of activity was generated around this with staffing firms, especially in the areas of finance and accounting, I/T and legal. But it’s probably too early to see any of that yet,” he said.

Sapphire Technologies, an I/T staffing firm with 40 U.S. branches, offered mixed views on the those convulsions from Wall Street.

“Hiring managers are cautious and only filling critical needs. Sentiment is certainly swayed by media coverage of the stock market, the economy, the election and the federal intervention plan,” said Kelly Schneemann, branch manager in San Antonio. “But there really hasn't been any effect in the San Antonio region. Job orders actually have increased with a large mutual fund company we currently work with.”

Dan Cordero, regional manager for the southern California region, said Wall Street’s woes have started to reflect back to him. “Before this week, September was a good month for us.”

Cordero saw an end of summer push to get projects staffed before the holidays. But the Wall Street brouhaha put things on hold. “Most managers think the hold will be temporary and feel business may return to normal in a few weeks,” he said.

“We do not feel (Wall Street) greatly affected our business,” said Bridgette Duhl-Rohder, branch manager in Bethesda, Maryland. “We have not seen a dramatic increase or decrease in jobs.”

But Shannon Byrnes Weaver, branch manager in Chicago, feels the quake, noting Chicago is also a “Second City” for finance. “In most cases, it froze additional hiring unless it is for special projects surrounding acquisitions,” she said. “It has definitely slowed the number of open contract positions we are seeing. Some financial firms are using this as an opportunity to scoop away talent from troubled competitors.”

Jim Kyle, an Express Employment Professionals franchisee in Houston took care to stay in touch with his clients as Ike made landfall, even if meant working from home. Now, post-hurricane, business is rolling in. “We are still feeling the effects of Ike, but we have lots of work to offer. I’m confident the loss of revenue can be offset,” he said.

Recovery organizations have descended and are hiring. He even turned some away because the jobs they offered were deemed too risky by him. But with all the recovery work to be done, Kyle reports a “recruiting crunch.”

Dwayne Petty, Express Employment Professionals franchisee in Harrisburg, Pennsylvania, saw a surge of business compared to August as new clients knocked on his door. “One client even moved some of their employees over to our payroll,” he said.

Commuting distances remain an issue with gas prices still high, “but companies just aren’t giving in to wage increases to get quality workers,” he said.

Daniel Conroy of Michael Latas & Associates in St. Louis, specializing in commercial construction executive search, said the prospects of a federal rescue plan helped free up a lot of money that was “hiding in a rat hole.”

“It was banks, not our contractors, who held projects up. The contractors I have as clients have backlog. It’s the developers that were having trouble because they can’t get financing,” he said. “I’m hearing positive things from my clients right now. I think a rescue plan will get banks lending again and put commercial projects back on the books.”

The U.S. Department of Labor is scheduled to release employment data for September on Friday, Oct. 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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