Europe's economic barometers look as sunny as the May weather. The threat of a populist wave has abated. France's pro-European president Emmanuel Macron wants to get more people into work by slashing red tape.
This should all be good for Europe's staffing firms, slight Brexit wobbles notwithstanding, as businesses take on more workers to meet increased demand.
But this economic bellwether isn't quite so bankable in the eyes of investors anymore. Shares of Switzerland's Adecco Group AG and Dutch rival Randstad Holding NV are under-performing. In the past month alone, they have fallen between 3 and 5 percent.
That's less to do with the economic cycle running out of steam and more to do with existential threats, mostly technological, to their own business models.
Staffing firms have historically done a good job of defending themselves against competitive threats from online job boards and aggregators. The intense competition for low fees among online newcomers has caused more self-harm than disruption.
Adecco and Randstad have kept their gross margins pretty stable since 2007 at nearly 20 percent, according to Bloomberg data, a sign of how big corporate clients are willing to pay for more complex services like outsourcing business processes. Monster Worldwide, a poster child of the dotcom era, ended up selling itself to Randstad in 2016 after years of shrinking revenue.
But there's a worry that Google, along with social-media firms like LinkedIn and Facebook, will ratchet up the pressure. Its job-search engine will scour a wealth of different job boards and social listings, meaning expanded reach. It will also use machine learning to better organize and index hiring roles.
None of this should be fatal for a firm like Adecco, but by cranking up transparency in the recruitment market, Google threatens the data advantage old-school firms still have. Incumbents could also be forced to up their spending on technology in response.
Then there's the longer-term threat from automation, which turns jobs for the boys into jobs for the bots. Robotization will probably erode "a complete tier" of the staffing market, Deutsche Bank analysts said this week, while Credit Suisse research suggests some two-thirds of temporary jobs are at risk from automation.
In the face of dwindling revenue, the obvious response from staffing firms would be to automate their own processes and invest more in technology, and that's already starting, to some extent. UBS analyst Denis Moreau also believes that the rising fixed costs of using robotics will keep big clients turning to recruiters as a source of flexible-cost labor. But profitability is expected to stagnate. Growth in Adecco and Randstad's earnings before interest, tax and amortization will be around zero on average between 2016 and 2030, down from 3 percent during the previous 16 years, according to Credit Suisse.
A lot of these worries are long-term and go beyond the economic cycle that is still going strong. It's a reminder that, with worries about Europe's politics fading, investors are likely to push management to address long-term themes like automation and digital disruption to justify valuations.
The message from Macron matters, but so does the parting shot from Barack Obama to Donald Trump earlier this year: Robots, rather than globalization, will have the bigger impact on the workforce.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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