Published October 05, 2012
Businesses wary about the U.S. presidential election and the outlook for fiscal policy will probably hire temporary workers in the fourth quarter rather than full timers, a view that lifted staffing company shares on Friday.
A surprise drop in the U.S. unemployment rate to a near four-year low of 7.8 percent and creation of 114,000 jobs in September, along with improving consumer confidence, suggested that employers are filling more jobs, analysts said.
Though the temporary help services category showed a decline of 2,000 in the month, analysts noted a 582,000 jump in the number of Americans who want full-time jobs but are working part time. That shows businesses are reluctant to commit to permanent hires, they said.
The September decline in temp hiring was small, considering that more than 137,000 temp jobs have been added this year.
"Businesses are hiring part-time workers, and many of these are indeed temporary because companies do not have any long-term commitments nor do employees in many cases have an intention of staying long-term," said Sung Won Sohn, economics professor at California State University Channel Islands in Camarillo, California.
At midday Friday, staffing shares mostly outperformed the broader stock market.
TrueBlue Inc, which specializes in blue-collar staffing, jumped 1.4 percent to $16.30. Kelly Services Inc rose 1.8 percent to $12.95, Kforce Inc rose 2 percent to $11.80 and Robert Half International added 0.8 percent to $26.46. All outperformed the S&P 500 stock index, which was up about 0.2 percent.
Manpower Inc shares were unchanged at $36.94.
In European trading, Randstad Holding NV, Adecco SA and Michael Page International Plc closed up 2.4 percent, 2.5 percent and 0.4 percent respectively.
A sub-8 percent unemployment rate will stoke consumer confidence and boost staffing needs, analysts said.
"As payroll hiring increases, temp hiring will increase as well, and it will probably still have a bit of an outsized increase simply because of the uncertainties on taxes and the fiscal cliff," said Steve Blitz, senior economist of ITG Investment Research.
The fiscal cliff refers to the year-end deadline for about $500 billion in expiring U.S. tax cuts and automatic spending cuts set for next year unless Congress can compromise over lowering the budget deficit.
"People will want to take on labor to reflect the increased demand, but they don't necessarily want to take on labor and the related benefit and severance costs if the worst comes to pass," Blitz added.
But many Americans have stopped looking for work or are underemployed, and likely will remain so for some time.
"Why CEOs and executives are almost frozen is that there is a lot of guesswork as to what taxes are going to look like, what regulations are going to look like, what healthcare costs are going to be," said Steven Raz, partner with Cornerstone Search Group in Parsippany, New Jersey, which specializes in recruiting for the pharmaceutical and biotechnology industries.
Raz said at least 70 percent of the executives he deals with that would be adding permanent jobs are not optimistic because of the lack of clarity on taxes and other regulations.
"Half of all college graduates are sitting on their parents' couches, millions and millions of Americans are just out of work, and the duration of time people are on unemployment has been ticking up," he said.
Chad Oakley, president of executive recruiting firm Charles Aris Inc in Greensboro, North Carolina, said the United States employment market is a tale of two recoveries.
Potential employees with a four-year or advanced degree in the sciences, math and engineer can have their pick of jobs, he said.
However, "with lesser educated employees, we believe the vast majority of those individuals will be perennially under-employed," he said. "They may find a job, but their best jobs happened in the past."
(Additional reporting by Lucia Mutikani in Washington; Editing by David Gregorio)