Temporary staffing
Interview: William Blair---Matthew Lipkin---Economist
>> home depot is adding another item to the shopping cart, agreeing to buy as many as 24 of kmart’s closed outlets for $365 million. the discount chain closed them to get out of chapter 11 last year. the exact number of stores, locations and amount to be paid will be decided in in the next two months. home depot to convert the locations in its own name plans to add 185 other stores this year and spend about a billion dollars renovating older locations to keep up with lowe’s. may’s employment report released today came in stronger than expected. our next guest says temporary staffing companies continue to be one of the strongest areas of the job market . matthew lipkin with william blair joins us from chicago. what exactly is the reasoning behind temporary staffing being so strong? to me it tells me companies are gun shy about hiring and don’t want to take on all the baggage and the cost of taking on a so-called permanent employee?
>> i think that’s correct. actually, a lot of companies now are using a try-before-you-buy mentality with the work force. and we’ve seen over the last 40 years in clerical and light industrial areas the increased uses of temporary staffing. that is penetrating into white collar professions and companies are taking their time. we are seeing permanent hiring picking up but there’s no question that the temporary staffing industry remains a leading indicator for future permanent hiring.
>> as far as industries within, i don’t want to say the temporary hiring industry, but what industries are actually leading the charge in terms of taking on new people permanently?
>> yeah. if you look at the job numbers today from may, we saw widespread job growth, no question about it. it was big for the third consecutive month. it didn’t move the needle on the actual unemployment rate because you have higher labor participation so the denominators are going up on that calculation but 250,000 new jobs for the third consecutive month. the areas, manufacturing did pick up last month and has been up for the last three months, which is an encouraging sign but the far larger service producing sector had job growth in areas such as healthcare. restaurants were surprisingly strong and temporary stapg industry. here’s an industry, temporary% stving that―staffing that accounts for 2% of the work force and for the last year has accounted for 1/4 of all the new jobs created. so it’s doing its job as a% buffer for all small and large% companies as they look at work forces.
>> interesting, because we had the president of kelly services on our air earlier and one of the things he said is that they’re always looking for temporary help. but here’s something else he had to say.
>> first off, we’ve produced a million jobs in the last three months. that’s a tremendous amount of jobs and i have to tell you, i think there’s a very good chance we’ll produce another million to 1.5 million jobs before the end of the year. this is the sweet job creating part of the upcycle and will create a lot of opportunity for people.
>> is that a possibility? a million to million and a half more jobs on top of the 1.2 million we’ve already created?
>> it’s absolutely possible and carl runs a fine company that is one of the industry leaders. so i’m going to defer to him on the forecast. but there’s no doubt in my mind% that that absolutely can happen. yeah.
>> interesting, now, returning to your area of expertise which is individual companies. you’ve just upgraded hudson hild highland group today, small cap by any measure, 288 million% -market cap but went to market perform from outperform. what does about hudson highland that will lift the stock higher as it’s already up 22%.
>> the spin-out occurred a little over a year ago, spring of 2003. and it was a collection of acquisitions that the former parent of monster, called t.m.p. worldwide, had made. and it was leading red ink, basically. they spun it out into a separate public company, brought in a veteran management team. the c.e.o. had been with manpower for many years and has 20-plus years of staffing industry experience. and over the past 15 months, he and his management team have done many things, too many to list here. but they’ve made many improvements and now the company is nearing profitability. this is the kind of industry where a management team who understands the metrics and the compensation ought to be able to turn a company profitable even if it’s not big margins, but what i’m seeing now is this company is on its way to profitability. i’m not sure exactly when, but it’s a higher risk stock because of all the background i’m talking about. but in my opinion, there’s almost no question, now, that it will be profitable and when it does, it will be a very strong company.
>> matt, our thanks to you. the surging cost of oil is not forcing metro companies to put more money into exploration.
