Reality Check: June US Perm Hires Grow Moderately, Recruiters Say --Lucas Group: 'Recruiters Are Beginning to Earn a Living Again'

Market News International New York - June 25, 2010

NEW YORK, June 25 (MNI) - Despite swings in the national employment data, U.S. permanent-hiring activity is steadily, if modestly, growing, according to personnel executives.

Recruiters said June hiring extended a recent trend of modest permanent-job additions among clients, who are a little more comfortable with their own business outlook. Contingent staffing is still playing the largest part in the labor market's maddeningly slow recovery, but the perm picture is gradually improving, they said. A key bright spot for several months has been manufacturing, which across several sectors is growing personnel. Compensation is mostly steady, but the first signs
have emerged of slight upward pressure for highly skilled, specialized jobs.

Becca Dernberger, vice president of staffing giant Manpower's northeast division, said what started out at the beginning of 2010 as a temporary-hiring turnaround has finally spilled over into the perm and temp-to-perm arenas, and she sees this happy development as sustainable.

"What has changed in the last month and a half is that when we get requests for positions, they're not temporary positions," Dernberger said, who oversees 112 offices from Maine to Virginia, as well as Michigan and Indiana.

"Client companies aren't saying they're out of the woods by any means, but they are solid companies that are truly seeing the reality of business picking up, and they're adding headcount."

Direct placements, which install fresh candidates directly into permanent positions, have been a little slower to recover than have temp-to-perm conversions, she said. Her June business is beating her
expectations, as well as May figures. Year-on-year her numbers are also better across all geographical markets, though she said direct placements are closer to flat.

Diverse areas of manufacturing are expanding personnel, especially in the skilled trades, Dernberger said. Also active are orders for clerical, call center and government jobs, the latter fueled by federal stimulus-funded projects. But she said at least one recession-era behavior hasn't changed. The hiring process is still very slow, and employers are conducting much more due diligence before deciding on new employees.

She's encouraged by China's decision to float its currency more freely, which should result in the yuan's appreciation vs. the dollar and render U.S. exports more attractive.

"I think it's going to build company's activity and results and it will build confidence," Dernberger said.

"I'm more optimistic than I was a few months ago."

Wages, she said, have been static for some time.

A national executive recruiter with 16 U.S. offices said her business has firmed each month this year since February, and year-on-year comparisons are also encouraging.

"There's definitely more demand," said Andrea Jennings, chief executive of Atlanta-based Lucas Group, which specializes in middle- and senior-management placements in the $100,000-$250,000 annual pay range. "Our number of interviews on a weekly basis has doubled in the last year, and our web leads have doubled since January. Recruiters are earning a living again."

A vast restructuring underway at Lucas Group has increased productivity, but Jennings said that's not the whole story behind her better business.

"You don't hire new people, even if you're replacing positions that you've done without, unless you're more confident than a year ago," she said of her clients, and added that they are also a little more flexible about pay than they have been.

In particular demand right now are human resources professionals, who are usually among the first to be cut in downturn, she said. And she's seen candidate shortages in certain corners of information technology - higher level infrastructure and business development personnel, including those with hybrid backgrounds in both IT and business management.

Jennings said that by geography, California and Phoenix markets are lagging.

At its current run rate, Lucas Group should post revenue gains of 10% to 14% this calendar year, she said.

"Any amount up is a victory."

A personnel specialist in California's Inland Empire region, the distribution hub for the ports of Los Angeles and Long Beach, said the staffing business is still badly bruised and employers remain conservative in their staffing strategies.

"Recent business is tough," said Larry Flood owner of the Rancho Cucamonga, Calif. franchise of Oklahoma City-based Express Employment Professionals, a leading privately held staffing firm with about 600 U.S. locations. "The employment picture is very, very cautious."

Flood said that while clients' business confidence is minimally increasing, employers are still trying to determine whether the economy's uptick is fleeting or not. Permanent hires just aren't on the radar screen yet.

This time of year is typically the beginning of the holiday staffing season.

"We haven't gotten much of that yet," said Flood. "Employers are going to hold off as long as they possibly can. I have very few clients that have gone to second or third shifts."

Though nowhere near pre-recession levels, inbound shipments related to construction have ticked higher lately, Flood said.

A colleague of his in Washington State said his direct placement activity remains stagnant, and his temp-to-perm conversions are only slightly better than that.

"I continue to see companies less anxious to pull the trigger about hiring onto their own payroll," said Mark Hagen, owner of the Mt. Vernon and Bellingham Express franchises. "They're utilizing us for longer than the usual 90 days."

This uncertainty has fuelled his contingent placement commerce upward, however.

"They're fearful that at any point things could go backwards again, and they want to be in a position where they can control those costs fairly quickly," Hagen said, and added that his candidate pool continues to expand, though no longer at last year's torrid pace.

Most active, he said, are food industry firms, particularly seafood processors, looking for line workers. Another busy client right now is a manufacturer of absorption materials, supplying oil-spill cleanup efforts in the Gulf of Mexico.

June orders are shaping up to be strong at both of his locations, and Hagen said he's seen month-on-month and year-on-year gains throughout 2010. He expects his offices to produce double-digit percentage growth in billable hours this calendar year.

A recruiter who handles top placements in mostly rural-based heavy industrial firms said manufacturers are hiring operations executives experienced in lean manufacturing and supply chain management. But his second-quarter business has moderated some from a busier start to the year.

"I see a mild double dip," said David Brandau, president of Midwest Executive Search, in Troy, Mich, whose clients include commercial vehicle and equipment makers. He handles mid-, upper- and C-level management placements across the Midwest and the Dakotas.

Brandau is concerned that the U.S. oil spill could have a domino effect in the broader U.S. economy and that Europe's fiscal woes will eventually affect his clients' exports.

He's less sanguine than he was about his own business outlook for the second half. Though he's placing regional sales managers, for instance, employers are still making net-cuts in these positions. Yet private equity firms are still happily financing smaller companies, which typically results in turnover at the top of the organizational chart.

"The foot soldier positions are decreasing, but the generals are maintaining, more or less," Brandau said.

The executives that he speaks with aren't overly optimistic, either. They're relieved about year-over-year improvement, he said, but they're still cutting costs.

The Labor Department is scheduled to release June U.S. employment data next Friday, July 2, at 8.30 a.m. EDT.

Editor's Note: Reality Check stories survey sentiment among business people and their trade associations. They are intended to complement and anticipate economic data and to provide a view into specific sectors of the U.S. economy.

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