Business Services

Employment services industry bears the
brunt of downsizing

With no let up in the unemployment woes for the U.S., the employment services industry continues to struggle to surv ive recession. According to Addeco, the world’s largest staffing group, recovery in its main markets – Europe and U.S. – is not expected to come by anytime soon. The company registered a sharp decline in its second-quarter sales and initiated cost-cutting measures to tackle the situation. Meanwhile, the job market condition has continued to worsen, especially in the U.S. where the unemployment rate is expected to hit 10% this year.

This was also evident from the seasonally adjusted results of the latest Manpower Employment Outlook Survey, conducted quarterly by Manpower Inc. According to the survey, employers in the U.S. are currently planning to keep their staffing levels relatively stable during Q4 2009. Jeff Joerres, Chairman and CEO, Manpower Inc., said “The hiring intentions of U.S. companies continue to be sluggish. While there are areas within the U.S. which are showing an uptick, we have yet to see the robust hiring intentions that would indicate a full labor market recovery."

Approximately, two-third (69%) of more than 28,000 employers, who took the survey, stated they expect no change in their hiring plans for Q4 2009. About 12% of the respondents expect an increase in staff levels, while 14% project a decline in payrolls and the remaining 5% remain undecided about hiring plans.

Every region covered by the survey has weaker employment outlook as compared to the level seen a year ago. Among the various regions, the Northeast has the weakest outlook. The West and Midwest have relatively stable outlook while the South region showed a marginal increase in optimism among employers.

From a long-term perspective, however, the employment services industry is expected to display a modest growth over the period 2008-2013. According to Freedonia Group Inc. report, the industry is expected to grow at a compounded annual growth rate (CAGR) of 4.1% since 2008 to reach $105.0 billion in 2013. This growth estimate is primarily based on the above-average growth in various segments of the industry such as information technology (IT), healthcare and temporary help services, as well as the February 2009 economic stimulus legislation that is designed to save and create jobs. However, the major hindrances for the industry growth could be a slow recovery from the current economic crisis, competition from global workforce and online job websites, and the increasing outsourcing of temporary and permanent jobs (such as IT and call center jobs) to other countries.

The temporary help service segment is expected to grow at a CAGR of 4.4% through 2013 to reach $87.5 billion, maintaining its position as the dominant segment of the employment services industry. This segment will benefit from the flexibility provided by it to address the issue of workforce fluctuations.