R. A. Cohen Consulting Newsletter

Staffing Market Update:

The Future is Spotty

The short term (next 6-9 months) picture for the Staffing Industry is unclear as far as the direction it will take. The good news is that our economic growth continues however at a slower pace. Since our industry closely mirrors the economy we can expect slower growth to be a fact of life over the short term.

How we view the market may say as much about us as it says about the market! Do you feel lucky?  

Hopefully, you are located in a good spot where growth is expected in your geography and staffing sectors

There are both geographical and categorical pockets of strength as there are similar pockets of weakness for both. According to Staffing Industry Analysts (SIA) the May GDP forecasts for the next six months by State show the best growth is expected to come from:

New Mexico-followed in no particular order by:

ID, WY, ND, AZ, TX, UT, NE, KS, OK, MO, KY, OH, PA, FL, MA & NH.

States where the least growth is projected over the next six months are:  AK, AL, MS, SC, IN, MI, MT, VT, NJ & ME.

Job Categories expected to Grow

Leisure and Hospitality, Professional sectors, Natural Resources and Mining, Wholesale and Retail Trade and Manufacturing.

Job Categories expected to Decline

Education and Health, Information Services, Temporary Help, Construction, Financial activities and Government (we hear they are out of money at the Federal level and in many States, however it could just be a rumor).

It was the Best of Times, it was the Worst of Times

Unemployment in June was up to 9.2%, while new claims for unemployment in June were down. Yet the US college graduate unemployment rate was down to 4.41% in June.

Temporary help was down 12,000 jobs in June and still up 7.3% year-over year.

Direct hire is up over 10% from last year while executive search hiring is down about 13% from last year.

The number of PEO employees is up for the first time in almost three years. Layoffs as a percentage of total employment were down to 1.2% last quarter however in June it rose to 1.4%.

These factoids can be a bit confusing.  

A good news item is that recruiting remains more difficult for most staffing firms than selling-so people are still hard to find. Most staffing operators would prefer it this way as they are experts at recruiting which should help them fill more requirements and do more business. At least that is the theory.

If recruiting is so hard-why are gross margins declining?

Many corporations in the US are making record levels of profits in some areas like gas and oil and banking to name a few; yet they are not hiring. They continue to push for their employees to continue to produce more with less human resources. Yet someone must be hiring all those College grads.

So our short term forecast for our industry remains unclear and somewhat contradictory.

Some staffing firms with those healthy profits are seeking quality acquisitions as their organic growth has continued to slow. However, those offering recession type valuations have not been successful.

Staffing firms that have survived the worst economic period of their business life or anyone else's for the past 80 years are not inclined to give away their businesses at fire-sale prices. Quality firms are demanding and receiving good valuations.

If your firm has only expanded organically up to now, it may be a good time to explore further expansion by acquisition. More and more staffing companies are finally entering the M&A marketplace looking to cash in on their recovery from the last recession. If you offer fair values you could double your revenue and diversify your client mix with a couple of quality acquisitions over the next year.

Come visit us at a staffing conference this Fall

R. A. Cohen Consulting will be exhibiting in Booth 517 at the ASA Staffing World conference in New Orleans, LA on October 11-14 www.americanstaffing.net/convention and also in Booth 119 at TechServe Alliance Conference in Phoenix, AZ November 2-4 www.techservealliance.org/conference2011/index.cfm

Please come by and discuss both buying and selling opportunities or if you can't wait that long contact us with the information below. This could be the Best of Times to buy or sell a company. For a confidential, no-cost discussion: