Temporary Workers Near U.S. Record Makes Kelly a Winner
James D. Jones III has been drafting new drawings of the piping at an Atlanta-area factory on a contract for ManpowerGroup Inc. (MAN) for the last 10 months. When this job ends, he says it will be easy to find another.
The Texas native is part of a groundswell of temporary workers at staffing companies from Manpower to Kelly Services Inc. (KELYA) The number of temps and their share of the U.S. workforce are both headed for records this year, according to forecasts by research firm Staffing Industry Analysts and others.
“There’s been this push to get things just in time,” Jeffrey Joerres, chief executive officer at Milwaukee-based Manpower, said in an interview. “Companies have gotten their hands forced on being more adept at trying to figure out their demands for talent as much as their demand for capital resources.”
Increased consumer demand, a greater need for flexibility and new health-care requirements are prompting businesses from Ford Motor Co. (F) to the PeaceHealth health-care system in Washington state to turn to staffing firms. Companies’ reluctance to hire amid concerns the economic expansion may slacken has also been a boon for Manpower (MAN), its peers, and their shareholders. Many stocks in the industry are outpacing the Standard & Poor’s 500 Index, and analysts see more gains: Almost two-thirds of ratings for eight among the largest staffing companies are buy.
Automakers, retailers including Wal-Mart Stores Inc. and pharmaceutical companies such as AbbVie Inc. all use temporary staff. Those workers, full-time or part-time, handle everything from manning factories and warehouses to working in information technology or sales.
Ford (F), based in Dearborn, Michigan, has increased temporary workers by 11 percent over the past year amid rising sales and car redesigns, said Dan Fortunato, director of purchasing for construction and services. The positions include product design, purchasing, marketing and IT, he said.
“Staffing companies allow us to be more nimble, especially with project-based, time-specific positions that require specialized expertise,” Fortunato said.
Close to Record
The U.S. has added 913,200 temporary workers since the end of the recession in June 2009 -- about 19 percent of all new jobs. Their number rose to 2.66 million in April, about 11,300 shy of the April 2000 record, according to U.S. Bureau of Labor Statistics figures released May 3.
Staffing industry revenue will increase 6 percent annually the next two years to $139.4 billion in 2014, based on an April 9 estimate by Mountain View, California-based Staffing Industry Analysts.
What’s different in the current economic expansion compared with past recoveries is that companies are reticent to hire even as their business is growing and they need more staff, said Jeff Silber, an analyst at BMO Capital Markets in New York who recommends buying Manpower.
“The only other option is to either work full-time people harder or hire temps,” Silber said.
The preliminary April tally shows temporary workers represent 1.97 percent of the labor force, close to the record of 2.03 percent set in April 2000, in data that go back to 1990.
“It is going to eclipse the prior record high,” said Paul McDonald, a senior executive director at staffing company Robert Half International Inc (RHI). in Los Angeles, adding penetration of 2.5 percent to 3 percent is possible at some point. “This recovery is producing jobs on a temporary basis even faster than the last recovery.”
Investors noticed. ManpowerGroup and Kelly Services, based in Troy, Michigan, have risen 42 percent and 23 percent respectively in the past year, while the S&P 500 gained 20 percent. TrueBlue Inc. (TBI), a Tacoma, Washington, staffing firm that specializes in blue collar placement, has jumped 34 percent. On Assignment Inc. (ASGN), a Calabasas, California-based company focusing on information technology, has risen 53 percent. Robert Half’s stock is an exception with a 18 percent increase. Still, analysts are bullish about its prospects: out of 12, nine recommend to buy Robert Half and three to hold.
The demand for temporary health-care workers is poised to increase with the 2010 health-care law mandating more people obtain primary care coverage and an aging population requiring added treatment, AMN Healthcare Services Inc. (AHS) CEO Susan Salka said. They include temporary nursing staff and doctors, known as locum tenens, said Salka, whose customers include Providence Health & Services, New York-Presbyterian and Kaiser Permanente.
“As the market recovers, we’re growing faster than the market,” Salka said in an interview. The stock of San Diego-based AMN has jumped 94 percent in the past year.
The PeaceHealth health-care system, an AMN Healthcare client, more than doubled the use of temporary nurses last year from 2011, said Theresa Mazzaro, workforce planning consultant at the 16,000-employee company with clinics, hospitals and physician groups in Alaska, Oregon and Washington. Last year PeaceHealth spent $1.88 million on temporary staffing, including for therapy and other care, compared with $883,000 in 2011, she said.
In the pharmaceutical industry, a move to more specialized products is accelerating the use of outside sales personnel, said Daryl Gaugler, senior vice president at Quintiles Transnational Holdings Inc. (Q)
“There’s a shift, particularly among top five pharma companies, to find ways to shift the staff from ratios that might be 95 percent fixed and 5 percent variable to 80 percent/20 percent,” Gaugler said.
Quintiles’s stock jumped 5.3 percent yesterday on its first day of trading, after the Durham, North Carolina-based company raised $947.4 million in an initial public offering.
In one instance, a drugmaker hired Quintiles workers to handle field sales and marketing support for older drugs while its own staff focused on selling a new one, Gaugler said, declining to identify the client.
While the number of temporary workers is rebounding from declines in the recession, profits haven’t fully recovered. The industry’s profit margins will remain below the 20 percent performance of the 1990s, said Randle Reece, an analyst at Avondale Partners LLC in Nashville, Tennessee. Margins may remain at 10 percent to “low teens” on average, Reece said. The analyst has a market perform rating on Manpower and Robert Half, whose margins top its peers’.
There’s a darker side to levels approaching record highs. Some companies rely on staffing companies to supply immigrant workers for industrial and warehousing jobs where permanent employees tend to complain about unpaid hours and transportation costs, said Tim Bell, senior organizer for the Chicago Workers’ Collaborative.
The transition started after the Sept. 11 terrorist attacks when the U.S. cracked down on undocumented workers and it’s been picking up in the economic recovery, Bell said. Since temporary companies are responsible for verifying eligibility, some businesses staff warehouse and factory operations almost entirely with employees from temporary firms, Bell said, avoiding the hassle of checking documents.
“About the last year and a half hiring has really started to ramp up again,” Bell said.
Chicago Workers’ Collaborative, a nonprofit organization promoting full employment and equality for the lowest wage-earners, primarily temp-staffing workers, is supporting lawsuits against Wal-Mart and some of its suppliers over unpaid hours and other complaints from temporary workers, Bell said.
“We’re committed to ensuring that anyone working in our stores, whether employed by Wal-Mart or in this particular case a temporary staffing agency, is treated appropriately and compensated fairly for every hour they work,” said Dan Fogelman, a spokesman at the Bentonville, Arkansas, retailer, adding a majority of employees are direct, not temps. “The expectations of all of our suppliers is that they always comply with the law.”
Most analysts covering the staffing industry are confident in its outlook. Out of 74 recommendations on eight of the sector’s largest companies, 64 percent are buy, 31 percent are hold, and 5 percent are sell, according to data compiled by Bloomberg.
The demand is so fierce right now that 39-year-old Atlanta temp Jones, who is paid $25 to $30 an hour, has standing requests from several companies offering a finder’s fee for referrals. It’s good news, because after working for staffing companies in at least half a dozen states, he’s not looking for permanent work.
“I’m the kind of guy who can leave one job on Thursday and show up on Monday in another state, ready to go,” Jones said. “There are jobs everywhere for me.”