U.S. staffing companies are seeing a gain in 2010 profits despite a 26-year high in the national unemployment rate, reports Bloomberg’s Steve Matthews and Anthony Feld.
Private companies hired fewer new employees last month than they did in each of the previous 10, with hiring the weakest on record since January. However, this has created an unexpected market for staffing companies, who are reaping the benefits of a fragile economy.
Employers are seeking outside agencies to help them reassess their workforces — and it’s creating a surge on Wall Street, with stocks in the Standard & Poor’s Supercomposite Human Resources & Employment Services Index posting 47 percent gains since August.
One of the reasons employers are turning to the staffing industry, is because human resources department cuts have left many companies unable to ramp up hiring. This is according to Tobey Summer, a staffing analyst at SunTrust Robinson Humphrey, who was recently interviewed by Bloomberg.
“What we are seeing right now in HR departments is a microcosm of the shift to a more flexible labor force” and “more variable cost structure,” said Sommer.
With the jobless rate likely to run at 9.4 percent in 2011, and improve only slightly in 2012, the staffing industry may continue to post record gains. As for employers — they may find that taking a second look at their hiring costs can help them cut spending, and even log profits in this uncertain economy.
Source: Bloomberg