Friday June 5, 04:22 PM
US staffing companies encouraged but see no upturn
By Nick Zieminski
NEW YORK, June 5 (Reuters) - U.S. staffing executives are encouraged by evidence that the economy is shedding jobs at a slower pace, but say two months of improvement in government data do not yet make a trend.
They point to $70 oil, rising interest rates, and the bankruptcies of General Motors (NYSE: GM - news) and Chrysler (Xetra: 710000 - news) as factors that could interrupt or delay any employment recovery before it has a chance to take root.
U.S. employers slashed 345,000 jobs last month, the fewest since September and far fewer than forecast. The unemployment rate, however, rose to 9.4 percent in May, the Labor Department said.
'There are no signs that we've made a turn in the job market overall in North America,' said Tig Gilliam, chief executive of Adecco Group North America.
'We're still expecting monthly job losses for the next several months and an increasing unemployment rate,' he said, 'but an improving situation.'
Clients are still planning second- and third-quarter shutdowns and furloughs, Gilliam said, and many are taking a long time to fill open orders for permanent positions. It will take time for the overall labor market to stabilize, he said, and a good scenario would be no job losses by the end of 2009.
Friday's unemployment report 'is a little scary in terms of what the reaction will be, because a bunch of people will jump in and say everything's fine,' Gilliam said.
'NOT GETTING WORSE'
Roy Krause, CEO of Spherion Corp (NYSE: SFN - news) , said the jobs data were 'at least not getting worse.' Consumer confidence and Spherion's own surveys of employee confidence are encouraging, he added.
But rising oil prices could hurt consumers, and 'we haven't really seen the whole impact of all the General Motors stuff yet,' Krause said.
Higher interest rates in the bond market could also affect the outlook because they push up mortgage rates, he said. Spherion has yet to see a significant increase in orders from large accounts, except in the mortgage industry.
'We haven't seen any real turning point,' he said. 'We're kind of bouncing around at the bottom.'
Still, other data support some measure of optimism.
An index of CEO confidence rose 9 percent in May to a reading of 75.7, while a separate employment confidence index jumped 10 percent, according to a monthly survey by Chief Executive Magazine.
Both are at their highest levels since September. The magazine says the index is a strong leading indicator of future government jobs data.
Investors were encouraged, with most staffing shares higher on Friday.
'The worst appears to be over,' BMO Capital Markets analyst Jeff Silber said in a research note. 'While staffing stocks should react positively today, we prefer to wait for a pullback before becoming more constructive on these names.'
Manpower Inc shares were up 3 percent at $45.26 on the New York Stock Exchange, while Robert Half International Inc rose 3.7 percent to $22.89, and Monster Worldwide Inc (NASDAQ: MNST - news) gained 7.9 percent to $13.60.
Spherion Corp had opened higher, but was up just 1 cent at $4.33.
Adecco (Virt-X: ADEN.VX - news) was down 0.6 percent in Swiss trading.
Staffing stocks often act as a leading indicator of eventual demand, said Adecco's Gilliam, whose company's shares have rallied almost 50 percent since early March.
'I wouldn't be surprised at all to see some readjustment in market valuations before it sets in to improving valuations overall,' Gilliam said.
(Editing by Lisa Von Ahn) Keywords: USA STAFFING/OUTLOOK
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