The Associated Press November 29, 2010, 1:16PM ET

Analyst: Staffing services firms poised for growth

Staffing service companies saw a broad improvement during the third quarter, but those that specialize in the information technology sector are poised for the biggest growth, an analyst said Monday.

Boenning & Scattergood analyst William Sutherland noted that average daily employment for the services rose 25 percent in the third quarter from a year ago, while sales growth was up nearly 36 percent, according to the American Staffing Association.

Overall, temporary employment has made up 22 percent of private employment growth in the last two months, while staffing services represent half of total private sector hiring.

Still, the country's unemployment rate is hovering around 9.6 percent. Companies large and small have been reluctant to add permanent staff and an economic crises in Europe sent jitters through global markets Monday.

"We think staffing companies will benefit in either a sluggish or a more V-shaped recovery as U.S. managements have learned the value of flexibility following the pain and disruption created by multiple layoffs and downsizings during the recent downturn," Sutherland wrote.

The analyst said staffing companies that cater to IT jobs are likely to benefit more. That sector has recorded job growth in the low single-digits, compared with accounting and services professions, which continue to see jobs erode.

Sutherland believes the stocks of CDI Corp., Computer Task Group Inc. and Spherion Corp. are the best bets for the sector. CDI is benefiting from its exposure to capital spending trends, while Computer Task's focus on computer and healthcare will capture the growth in those industries. Spherion Corp. meanwhile, is diversified and will be boosted by a recovery in U.S. staffing.

Shares of CDI fell 24 cents to $16.42 in afternoon trading, while the stock of Computer Task dropped 33 cents, or 3.2 percent, to $9.81. Spherion's stock slipped 15 cents to $17.73, with a larger sell-off in global markets under way.


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