|
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |  |
NOVEMBER 17, 2003
Hiring Companies Are Working Overtime Cynics might read these seven words from the Federal Reserve -- "the labor market appears to be stabilizing" -- as a sop to certain Washingtonians who are anxious about their own job security. Fact is, though, the Fed's Oct. 28 observation was anticipated months ago by stock investors, who first saw more hiring on the horizon last spring. Since Mar. 31, employment-services stocks are up 79%, more than triple the gains in the Standard & Poor's (MHP ) 500-stock index. Along with such giants as Adecco (ADO ), these companies include at least eight others with a variety of specialties and market values of more than $500 million (table). Yes, they have already rewarded the investors who bought back when it was Uncle Sam who was doing the bombing in Baghdad. And yes, the easy money in these stocks is gone. Yet this run of happier days for shareholders of employment-services companies, which have expanded far beyond simply filling the odd temporary receptionist's job, may not be over. IT'S INSTRUCTIVE FIRST of all to look back at what happened to this group of stocks when the nation crawled out of its last recession. In June, 1991, the U.S. labor market broke an 11-month string of smaller and smaller nonfarm payrolls. In the seven preceding months, the stocks had gotten off to a head start, jumping 46% from a low the previous October. But they didn't stop there, gaining 9% more through the rest of 1991, 23% the next year, and 15% in 1993. History rarely repeats with precision, and with steeper unemployment insurance and workers' compensation costs, future job-creation trends are sure to change. But most staffing companies see clearer skies ahead. A key factor for investors is that the group has cut costs and debt. The Swiss firm Adecco is a good example. It is more leveraged than most staffing companies. Yet the industry's leader has worked net debt down this year by 23% and lowered its own payroll by 2,500, or 8%. Result: Costs in the third quarter fell 9%, driving operating income up 25% on a 2% gain in sales. For the group's higher stock prices to be justified, better revenue growth will have to arrive in 2004. Keane, which consults on and designs information-technology projects along with providing IT staffers or whole call-center crews in such lower-wage spots as India, says it sees strength among financial-services clients now, not just those in health care or the public sector, which had tided it over. "Even the most down-and-out industries have stabilized," CEO Brian Keane says. At Kelly Services, President Carl Camden similarly reports a widespread pickup across various clients, industries, and regions. "For the first time since the recession started, we feel that we are moving into the job-creating part" of the cycle, he said. Some smaller companies, such as Resources Connection in Costa Mesa, Calif., are coming through their first recession. Spun off by Deloitte & Touche in 1999, it went public the next year and has been growing swiftly. Like its much larger and better-known rival, Robert Half International (RHI ), it provides companies with staffers for specific accounting and finance projects. Both are also helping clients hew to auditing rules under the Sarbanes-Oxley Act. MPS Group (MPS ), perhaps best known for its IT staffing unit, Modis, is expanding its ranks of lawyers for hire. Revenue in the professional-services division rose 4.5% in the third quarter over the prior quarter, as operating income jumped 27%. With their varying focuses, some of these companies will do better than others. But their strong balance sheets and prospects for sales growth make them fair bets on Washington's dearest hope: more jobs in 2004.  By Robert Barker
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
