Tuesday, December 29, 2009

Jobless Recovery in 2010 - MF Global

Recently MF Global released a research note concerning the top ten trends in 2010. One of the trends was the premise of a jobless recovery.

The following is the investor note from MF Global:

"2010 will be characterized by a jobless recovery. MFGR sees the unemployment rate peaking at 10.5% and closing the year between 9.5% and 10%. The unemployment rates in EM and ASEAN counties should fall more steadily while it will likely increase in Europe. MFGR is expecting the latter as many of the stimulus programs initiated by European government included programs directed solely at hiring or preventing layoffs.

Out of a survey of 10 Euro-Zone countries, 8 employed labour activation measures. Many of these programs are set to expire in the new year. As employers are facing a lack luster recovery, the likelihood of a robust expansion in the labour markets sans government incentives is minimal. Furthermore, employers will likely be forced to cut back on labour as its costs up to the point have been subsidized.

On the US front, the outlook for taxes is murky and the healthcare initiative which will likely force all employers to provide care or pay a penalty will discourage the expansion of the labour force. Though the Obama administration is extending the capital gains holiday for small businesses, employers need to feel confident that their profit margins will not erode in the future due to tax increases in order to genuinely contribute to job growth. Moreover, budget shortfalls at the state and local government level will cap government hiring.

Globally speaking, there has been a significant increase in structural employment that is now part of the new normal. The collapse of the financial markets has led to a permanent shrinkage of the financial industry and the impending regulation will make financial innovation, a factor that does lead to job growth, very difficult. The manufacturing industry faces the same problem. Globalization will lead to the removal of manufacturing jobs in advance economies and cause a shortage of skilled labour forcing many to look to build other skill sets."

Source: MF Global

Tuesday, December 22, 2009

Manpower Robert Half Valuation

  • For the past week there has been bullish sentiment again in the human resource, temp space.
Robert Half International (RHI) received upgrades and revisions to their expectations.

While Manpower (MAN) received an upgrade from Banc of America ML.

I'm a bit more cautious on the space especially with the run up for this past year. Although there has been an improvement in jobs lost; there continues to be an underlying problem in the global economy.

This growth has been fueled by government stimulus and not so much private sector demand. And the growth has been muted by recovery standards. The US for example revised their GDP growth for the 3Q down to 2.2%.

While employment survey after survey still speak to weak to flat growth for Q1 of 2010.

  • Valuation alone I would avoid the space till there is more clarity that there will not be a double dip recession. With commercial mortgage and ARMS, debt, and continued restrained spending by the consumer, and depressed wage growth there will be significant challenges abound to job creation.
  • Higher taxes in 2010 will be a certainty in the US. And that will depress consumer demand. The risk that this will further depress job creation with demand as slack as it is.
  • Valuations have run up to the point where these human resource stocks must meet or blow out its numbers. Take for example Manpower (MAN). I have pointed out MAN due to its lofty valuations in comparison with its competitors.
  1. Trading at close to 90x p/e, and on a normalized base close to 60x earnings. And this considering that they have had earnings that have declined with the growth implosion of 2007. I normally track the technology sector where growth is more attractive. Manpower is trading at multiple that are present for a technology company. Unfortunate the last growth that MAN has seen was back in 2007.

Wednesday, December 16, 2009

Department of Labor 2008 - 2018 Projections

The United States Department of Labor released their latest projection of what the future holds for US labor.

The labor force looks too decline as I've suggested. This just confirms that growth in the US will continue to decline unless something truly changes such as a competitive advantage, or technological advance helps the sagging growth in the US.

Also of note is the growth in the demographics such as the Hispanic population.

And where the growth in jobs are headed. Manufacturing and production seems to be on a steep decline.

The file can be downloaded through the following link (Please be aware this is a pdf file) :


Tuesday, December 15, 2009

Staffing Valuations Manpower MAN Kelly Services KELYA Robert Half RHI

So I was looking at the valuations of staffing firms after the recent run up, and with the 3rd quarter results having been reported.

Please do your own research on the following equities.

Points taken that seems surprising amid the still weak conditions for hiring.

  • Among the competition only three had positive earnings, this includes:

  1. ComForce (CFS)

  2. Manpower (MAN)

  3. Robert Half International (RHI)

  • Manpower (MAN) and Robert Half International (RHI) are trading at a significant premium to its enterprise value.

  • RHI has looked more favorable during its recent quarter. As the data above states they have managed their long term debt levels, and actually have a positive return on assets & equity.

  • MAN has continued to look like a balloon that is about to pop. On all metrics its stock has looked expensive. Trading on 86x earnings, market cap that exceed its enterprise value, heavy debt levels compared to its assets and equity, negative return on assets and equity. Margins also look weak compared to the rest of the sector.

As stated in prior posts the staffing sector continues to look fairly rich. RHI looks mildly attractive due to its cost control. While MAN still looks exceedingly rich in its valuations. It is trading as if it is a tech stock without the growth nor the cost control of its peers.

Feel free to chime in to create a discussion.

Monday, December 14, 2009

Unemployment trending down

Entering 2010 the U.S. unemployment rate is at 10%. Although I still find very limited prospects for hiring from most large corporations, and small businesses in the US I still expect the unemployment rate to trend down.

This is partly due to the Census entering the hiring juggernaut. The US government is expected to hire around 800,000 individuals that will bring the unemployment rate down. This will look positive on a short term viewpoint, however longer term unemployment will still be at historical levels.

There will also be increased churn among employees as they look for the economy to improve to switch companies. Rates of disgruntle have increased as hourly wages, and hours worked have been cut dramatically. Until capacity utilization reaches a peak or robust levels there will continue to be a weak demand for labour.

Wednesday, December 9, 2009

Sluggish Recovery In The US Economy And Employment

So I've been looking at the government figures of their latest unemployment report from last week. The government figures beat consensus by a fairly large number.

130,000 jobs expected to be lost, while figures came in at 11,000 lost. While this was much better then expected figures were a bit inflated. As Rob Carnell from ING states the following:

In our view, the only potential fly in the ointment of this labour report is how believable it is. Payrolls has been making very, very slow progress in recent months, and such a dramatic turnaround will raise eyebrows, and may not be taken at face value by many. An improvement in the payrolls series always looked on the cards from last month. But most of the labour market data in the run up to this release had been consistent only with a very small step forward, so we may need to see this backed up again next month before concern about the labour market can really be filed away as ‘last year’s worries’.

We are also slightly curious about the apparent surge in government jobs, which on revision have risen by more than 50K in the last two months. When state and local finances are in such a deep mess, even the Obama fiscal package is unlikely to have generated this rapid turnaround in the public sector. More believably, goods producing, construction and manufacturing jobs all saw continued large falls.

So I would tend to continue to be cautious to a continued pick up. I don't believe that with higher taxes, increased regulations, and health reform in the United States pipeline that the government is going to have some epiphany to creating mass jobs.

Temporary employment firms ran up on these numbers however a closer look still states that most businesses are still relatively concerned with where this economy is headed, and have remained very non committal to hiring more workers. With wage growth that continues to be depressed, there is no sign that companies will hire a dramatic number of workers if they can wring out increased productivity from their current staff which has been under utilized, with full production at only 75-80% of their overall capacity.

Wednesday, December 2, 2009

US Federal Beige Book Nov 2 2009

Employment, Wages, and PricesLabor market conditions remained weak since the last report, with further layoffs, sluggish hiring, and high levels of unemployment in most Districts. However, contacts in the Atlanta, Cleveland, and Richmond Districts reported that the pace of job cuts generally slowed in their regions, and most contacts in the Dallas District reported stable employment levels. Despite generally weak employment conditions, some signs of improvement were noted. For example, contacts in Boston reported that they were beginning to hire and reverse pay cuts or freezes that were implemented earlier in the year, and contacts in the St. Louis District reported that the service sector had started to expand recently. Expectations for the holiday season were mixed across Districts, with contacts in the New York and Dallas Districts reporting lighter-than-normal seasonal hiring and/or increases in the hours of existing employees, as opposed to hiring temporary workers, to meet the seasonal demand. On the other hand, most retailers in the Richmond District have hired the usual number of seasonal workers this year.

Districts generally reported little or no upward wage pressures, while some Districts noted upward pressure in commodity prices, and most Districts reported stable selling prices. Wages were largely reported to be holding steady in the Boston, Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco Districts. Most Districts reported stable prices overall, although some reported higher input prices, largely for energy and other commodities used in production, with a limited ability to raise selling prices. Prices were reported as moderately lower in the Kansas City District, and downward price pressures were cited for some professional services and intermodal transportation firms in the Dallas District. Some makers of food products and chemicals in the Philadelphia District reported raising prices, and the prices of computer memory chips continued to firm in the San Francisco District. Retailers in several Districts indicated that they have managed inventory levels in an effort to prevent the steep price discounting that occurred last year, however, some promotional price discounting is expected through the holiday season.

Source: US Federal Reserve

Manpower MAN Valuation Dec 2 09

Source: Yahoo

I am not recommending a position for MAN. This is my own observation of the valuation for Manpower (MAN). Please do your own research regarding the investment of any equities or bonds.

It is really amazing the run that the temporary employment sector has taken. However is this run up justified when revenue is still down double digits compared to its year over year comps. And down significantly over a two year period.

Take note of the following :

- Manpower's p/e is at one of the industry's high. This stock trades at multiples much higher then the S&P. This as Manpower's revenue and net income have taken an extremely hard hit.

Manpower for the fourth quarter has already warned that their estimates will come in below estimates. This comes as analyst have not raised Manpower's estimates that far from the median. The notion that Manpower is unable to meet already low expectations speaks volumes with regards to the condition of the macro economy.

There's talk of how management has been managing Manpower beat the industry with its superior management. I tend to disagree when your revenue and net income have taken a significant hit for the past couple of years, along with the baggage of significant debt on its balance sheet. If we are in for another dip in the economy as a number of economist have suggested, credit conditions will become increasingly tight. Already there is worry concerning the 2010 pending tax increase, and pending health care costs forced by the government.

- PEG ratio. Normally a PEG ratio near 1 means that a stock will have a higher chance at out performing. However MAN is at a significant premium based on the PEG ratio alone. MAN trades at over 8x the mean, while the industry is trading at 3x multiples. This is a significant premium to pay for a company that has declining revenue, and net income, and increasing debt.

- P/B. The price to book looks cheaper compared to the industry. However when you look at the Manpower's historical p/e ratio it has not significantly traded higher to its current multiples. And that is with significantly higher sales, and revenue. S&P which had changed their metrics of evaluating MAN from P/E to P/B, downgraded their rating to SELL, and lowered it price target to 46.

So I would trend very carefully as employment will not rocket back with a vengeance. Consumers have not significantly increased their spending, and manufacturing has ticked down. There are many issues in the economy that continues to need to be resolved before employment stocks begin to look attractive again.

Monday, November 30, 2009

Economy still too weak to create jobs

"The recent economic data have been consistent with our view that the economy is recovering, but at a distinctly subpar pace," wrote Jan Hatzius, chief economist for Goldman Sachs, in a note to clients. "Growth looks too sluggish to lower the 10%+ unemployment rate to a meaningful degree anytime soon."

Ultimately, however, it's the economy's fundamental strength that matters, not any particular number. Most economists -- in the private sector and at the Federal Reserve - continue to believe in a disappointingly sluggish recovery that will only slowly bring the unemployment rate down.

Source : Marketwatch

Monday, November 23, 2009

Unemployment compensation tax skyrocketing

Unemployment compensation tax has not been a widely discussed issued among the rising unemployment rate. States in the US are having difficulties paying unemployment claims due to the significant rise in unemployment. States have to resort to bumping up compensation tax such as an example with Florida, which has to increase unemployment tax by 12x from $8.40 for every employee to $100.30.

There are 33 states which will increase their compensation taxes next year. This will make small businesses which continue to be cautious with regards to credit, and expansion will now find hiring or retaining employees more expensive. Although contract and temporary workers may see a slight uptick, these positions will likely be mute to the unemployment rate, and claims will continue to be at elevated levels. Without sustained job creation and longer work hours for current employees, these temporary positions will likely see very minimal increases. Hence, why I've been very cautious with regards to investing in these employment services stocks.

Friday, November 6, 2009

Unemployment rate hits 10.2% vs. 9.9% expectation OCT 09

Nonfarm payrolls dropped by a seasonally adjusted 190,000 in October, bringing to total number of jobs lost in the recession to 7.3 million in the United States.
5.6 million had been out of work longer than six months, representing a record 35.6% of the unemployed.

The employment-population ratio fell from 58.8% to 58.5%.

Discouraged workers and those forced to work part-time, rose to 17.5%

Tuesday, November 3, 2009

Administaff ASF 3Q 2009 Earnings

For the third quarter 2009, the company reported net income of $5.8 million, or $0.23 earnings per diluted share. For the nine months ended September 30, 2009, the company reported net income of $19.4 million and earnings per diluted share of $0.77


Administaff beat EPS by .01, while revenues were light of consensus. Administaff is in a bad segment of the economy. With credit continued to be constrained and health costs continues to pressure employers, Administaff will have to pray that the economy can right itself in a positive direction.

I remain cautious on the business services sector till there is a defined upturn in employment demand.

Thursday, October 29, 2009

Initial Jobless Claims Fell by 1,000 to 530,000; Jobless Benefits Plunged 148,000 to 5.8 Million.

Initial jobless claims fell by 1,000 to 530,000, a smaller drop than predicted by analysts. The total number of people receiving jobless benefits plunged 148,000 to 5.8 million. That's the lowest number of total claims since March, and the biggest weekly drop since July.

Source: Investors


The jobless claims disappointed somewhat with the small marginal drop in weekly claims. However the continuing claims dropped nicely to 5.8 Million. This however maybe due to a larger then expected drop in people's benefits expiring.

Looking ahead next week is the monthly jobs report. This may rise to 9.9%. So even with the better then expected GDP numbers, employment continues to be a lagging indicator of improvement.

The United States continues to add debt to get itself out of this recession, with the auto clunker program, and the first time home buyers tax incentive, without these consumer offers growth would have continued to remain tepid.

Wednesday, October 28, 2009

Taleo 3Q 2009 Earnings

Taleo beats by$0.04 and beat on revs for the Q3 earnings of $0.20 per share, $0.04 better than the First Call consensus of $0.16, revenues rose 8.7% year/year to $50.7 mln vs the $49.9 mln consensus.
Taleo growth story continues although at lower levels with 9% growth this third quarter. Operating basis Taleo managed to break even which is a good sign; however the macro economy continues to be weak which may continue to pressure future growth going forward. Taleo seems to be well positioned even as growth in the employment sector continues to be weak in the near term.

Wednesday, October 21, 2009

Robert Half International Q3 09

Robert Half International reported .02 better than First Call consensus of .04 estimate. Revenue fell year o/ year 37.4% to 725.9 million which was light of the $729.3 million consensus.

"While the global business environment during the third quarter remained challenging, year-over-year revenue declines in our staffing operations continued to moderate and, on a sequential basis, we saw some improvement in revenues in September."


My take on RHI is that they did a remarkable job of cost cutting, and continues to operate with what they got. They don't have any plans to add space, thus they have controlled their debt at remarkable levels. 

The take from the conference call is that they see business for the most part stabilizing. Although, it is too early to tell if this will be more then a mild up tick.

Margins have been affected mildly, while they are able to grow near their top line revenue.

Perm employment has also been better then expected, although this is a highly variable space.

I wouldn't invest in RHI till there is more stabilizing, although I do find that their business is mildly attractive due to the very low debt, and very good cost controls.

Manpower 3Q 09 better then expected; 4Q 09 Warning

Manpower reported earnings .09 better then First Call estimates, and revenues fell 26.0% year over year at $4.19 billion versus 3.95 Billion consensus.

Manpower issues downside guidance for the 4th quarter. It sees EPS of .17 - .27 vs. .28 consensus.

"We continued to experience sluggish demand for our services as the labor markets throughout the world were hampered by lack of demand for companies' products and services."


Pretty lackluster report. Margins was lower then anticipated, cost controls were not as strong as they could have been. Debt continues to restrict MAN from making sound investment.

Took some one time charges, which wasn't advantageous to their bottom line.

Guidance was very weak compared to the comps, which I have been very vocal that even after today's drop in stock price is dramatically overvalued.

-Dividend.com advised it's readers to sell prior to earnings.

-S&P Research advised its clients to sell MAN, after Manpower announced its earnings.

Near term this stock should continue to fall, as their just reported quarter is historically their strongest of the year. The 4th qt. may become seasonally weak, which they have already warned in their guidance. Guidance was extremely disappointing considering that most analysts had very tepid estimates, and didn't raise much in terms of their estimates as Manpower's stock appreciated. Still MAN is having continued operating problems. Since 2007, its earnings, net income, and EPS has declined year o/ year.

Sunday, October 11, 2009

Manpower MAN Valuation October 2009

So recently Citigroup Research has downgraded its rating near term of Manpower from "Buy" to "Hold", I will touch my own opinion of the valuations of MAN. Please do your own research with regards to the buying and selling of equities. I am not endorsing or advocating for the direction of a position.

From the near term analysis, MAN still seems overvalued.

P/E aspect MAN trades at 75.5 times current earnings. This should improve as MAN sales improve. However, at current mutiples this is well ahead of its valuation versus the SP and its peers.

Price to Book is also another metric to value a stock. Currently MAN trades at 1.72 which is well above its fair book value.

The yield of MAN is also below that of the SP. MAN current yield is 1.32%. The average is about 2.65 for the SP. Remember that compounded dividend may help your investment grow and offset any near term losses.

MAN's current profit margins of .7% also leaves growth oriented investors to be very cautious. Stock prices usually follow bursting sales and net income. EPS is a -82.09% and sales are a -35.70% for the year compared to last year.

Profit margins also continue to be very uneven, thus difficult to project business activity due to the nature of this cyclical cycle. Current year is 1.02%, last year 2.36%, two years ago it was 2.27%.

MAN also has a debt load, currently at 33.10%. Companies borrow to expand, however as sales falls, and credit conditions remain tight it is advised to look at companies that don't need to borrow, or leverage themselves as much to grow. If another recession becomes present in the near term once this initial stimulus wears off, then this debt may possibly become a problem.

So the bottom line, is that growth oriented investors should look elsewhere for a better story. Value investors should probably look elsewhere for a higher yield. While, those that fall in between should wait and see earnings on the 21st of this month. This is important as MAN projects this to be their strongest quarter of the year. However, will this justify their current valuation. At the mutiples of well over 75x current earnings, and with sales and profit margins as weak as they are, MAN should not be trading at the current multiples. It is out of line versus its peers and versus the market. If there are any questions regarding this analysis feel free to shoot a comment, and I will be more then happy to respond.

Friday, October 9, 2009

Initial Claims Ending Week Oct 3 2009 US

Current the official unemployment rate in the US is 9.8%. Economist feel that it will take till 2013 to have our unemployment hit 5%.

""Never before has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance," said Allen Sinai at Decision Economics."

The Labor Department reported that initial claims fell 33,000 to 521,000 in the week ended Oct. 3.

However, the decrease in continuing claims likely reflects people exhausting their unemployment benefits after several months of looking for work. This does not reflect that jobs are abundant, nor does it mean that economic conditions have improved dramatically.

Sunday, October 4, 2009

Sept 2009 Unemployment Numbers

Pretty bleak numbers came out this past Friday.

263,000 jobs lost vs. estimate of 175,000

Job losses up to 7.2 million

While the unemployment rate edged up to 9.8%

785,000 had stated that they were not working through a household study, rather then employer study.

U-6 rises from 16.8% to 17%. A clear tale that businesses continue to generate weak business growth for their products and services. The U-6 includes part-timers who want  full-time work but can't find one.

Weekly hours ticked down from 33.1 to 33.0. This continues to be a weak number especially when employers tend to add hours to current employees rather then hire temporary workers at the first sign of an improving economy. Staffing firms such as Robert Half, Manpower have said they see some regions stabilize. However, most regions continue to be weak in growth. I will touch on the point that certain stocks in this sector continue to be richly and overly priced.

Thursday, October 1, 2009

U.S. Initial Jobless Claims Rose 17,000 to 551,000

The number of Americans filing first-time claims for jobless benefits rose more than forecast last week, a sign companies are still cutting workers as the economy pulls out of the recession.

Applications rose by 17,000 to 551,000 in the week ended Sept. 26, from a revised 534,000 the week before, Labor Department data showed today in Washington.

The economy is on track for a jobless recovery and unemployment will likely remain high well into next year,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “We’re just not seeing a pickup in hiring. It means a long road to full recovery.”

Forty-one states and territories reported an increase in claims, while 12 reported a decrease. These data are reported with a one-week lag.

Source: Bloomberg

Wednesday, September 30, 2009

Restrained Hiring and Moderation in Job Loss Expected for Q4 2009

"CareerBuilder and USA TODAY’s Q4 2009 Job Forecast shows that, while employers are feeling more optimistic about the economy and job market, the majority plan to keep their staff levels the same for the remainder of the year. Continued moderation in job loss coupled with a hesitant approach to hiring is expected for the fourth quarter, according to the survey, which was conducted by Harris Interactive® from August 20 to September 9, 2009. More than 2,900 hiring managers and human resource professionals across industries participated nationwide.

Companies are switching their focus from cost containment to growth. Employers who have instituted pay cuts or layoffs in the last year are reporting that they have begun to restore compensation levels and rehire employees," said Matt Ferguson, CEO of CareerBuilder. "While these are positive indicators, the pace of hiring will remain restrained. It will take time to rebuild the confidence needed in the nation’s economy to trigger more robust recruitment programs."

Source: CareerBuilder

ADP Reports: US Private sector cut 254,000 jobs vs. expectation of 200,000 for Sept

"Private-sector firms in the U.S. cut 254,000 jobs in September, according to the ADP employment report released Wednesday. 

In August, a revised 277,000 jobs were lost compared with the 298,000 originally reported, ADP said.

Goods-producing jobs fell by 151,000, including 71,000 in manufacturing and 73,000 in construction. Services-producing jobs fell by 103,000.

"Employment losses have diminished significantly over the last two quarters," said Joel Prakken, chairman of Macroeconomic Advisers, the economic firm that produces the ADP report from payroll data provided by Automatic Data Processing, Inc.

According to ADP, 7.1 million private-sector jobs have been lost since the recession began, in line with the 7 million lost in the Labor Department's estimate through August.

Monday, September 28, 2009

52% of Unemployment Benefits Expired

With the recent US government data from the source below over half of those that qualify for unemployment has there benefits expired. There continues to be significant weakness in the labour markets. Although, there has been a slight rebound in jobs lost jobs are not created at the level that leads to growth. Presently there are two million college educated graduates unable to attain jobs, let alone the countless numbers with experience and skills who continue to face grave job market conditions. Once this stimulus works itself through the system and does not create the types of sustainable job growth look for this economy to continue to trend down. 

Source: http://ows.doleta.gov/unemploy/claimssum.asp

Sunday, September 27, 2009

Why Paychecks Could Shrink

"High unemployment and low inflation may lead to a decline in pay—and that could slow the recovery

For now, pay is still rising—a little less than 2% for the year through June 2008, according to the government's employment cost index. But the weak job market is creating the perfect conditions for a decline in pay: low inflation and high unemployment (9.7% in August). With a huge reserve army of unemployed—more than 2 million of them college-educated—it would be easy for many employers to demand concessions.

One of Wall Street's more bearish forecasters, Goldman Sachs chief U.S. economist Jan Hatzius, predicts that average hourly earnings will fall about half a percent from the fourth quarter of 2009 through the fourth quarter of 2010. Hatzius says his prediction accounts for workers' strong aversion to wage cuts. Without that adjustment, the projection would be negative 2%." 

 Source: Business Week

Wednesday, September 23, 2009

Initial Claims & Continuing Claims

On the 24th, US data will be released concerning initial claims and continuing claims. The market expects 550,000 for initial claims, and continuing claims at 6.1 Million.


The week ending Sept. 19, the advance figure for seasonally adjusted initial claims was 530,000, a decrease of 21,000 from the previous week's revised figure of 551,000. 

4-week moving average was 553,500, a decrease of 11,000 from the previous week's revised average of 564,500. 

Number for seasonally adjusted insured unemployment during the week ending Sept. 12 was 6,138,000, a decrease of 123,000 from the previous week's revised level of 6,261,000.

The interesting news this past week is that the US may provide additional extension of benefits for 27 high unemployment rate states. This means that the government pretty much has acknowledge that unemployment will persist to be a on going problem. Some estimates have come in that unemployment may continue to be at elevated levels till 2011.

So initial claims dropped a bit while more then what the market expected, however continuing claims was more then what the market had expected. Short term wise employment is slowly improving, while longer term structural employment continues to be weak.

Sunday, September 20, 2009

Jobless recovery till December?

A key index shows that an economic recovery is having trouble gathering steam. It also hints that employment won’t edge up until the end of the year.

The nonprofit Conference Board’s Employment Trends Index fell slightly in August, down 0.1 percentage point from a revised July number. The index now stands at 88.1 and is down 18.5% from a year ago.

“The flatness of the (index) in recent months suggests that we won’t see job growth until the end of the year,” said Gad Levanon, the group’s senior economist. “The fact that the index cannot get off the ground is another sign of a weak recovery, perhaps a jobless one.”

Source: Conference Board

Thursday, September 17, 2009

Weekly Jobless Claims Down, Continuing Claims Rise

The Labor Department has come out with its weekly jobless claims, and we are current faced with a very weak market for job growth. Numbers were down 12,000 revised to 545,000. The consensus was 575,000, while the prior figure last week was 550,000 on an unrevised basis and went up to 557,000.

The four week average fell by 8,750 to 563,000.  Continuing claims for the unemployed continues to rise, the figures rose by 129,000 to 6.23 million.  The figures from the prior week would have rose even more if Labour Day wasn't present.

1 out of 10 are out of work on a official figure basis, while 1 out of 10 are either working part-time or under employed. Weekly jobless figures have to be down to 400,000 to see a healthy economy develop.

Wednesday, September 16, 2009

First-Time Jobless Claims Expected to Rise

"The number of newly laid-off workers seeking unemployment benefits likely rose last week, evidence that jobs remain scarce.

Wall Street economists forecast that first-time claims for unemployment insurance rose to a seasonally-adjusted 555,000 last week from 550,000 the previous week, according to a survey by Thomson Reuters. The number of people remaining on the jobless benefit rolls also is expected to increase slightly, to 6.1 million from 6.09 million.

Still, the economy isn't improving fast enough to spur greater hiring. Jobless benefit claims have trended down since topping 670,000 in early April, but remain far above the 325,000 per week associated with a healthy economy.

Fed Chairman Ben Bernanke on Tuesday said the recession is likely over, though he noted that the economy isn't likely to grow fast enough to lower unemployment anytime soon. Most economists expect the jobless rate to top 10 percent next year, up from its current 9.7 percent."

Source: AP

Tuesday, September 15, 2009

US Economy Faces Big Test Next Month

"The economy remains weak and will face a big test next month when the government starts winding down its massive support programs, banking analyst Meredith Whitney told CNBC.

"There's not a lot of new job creation going on on Main Street—and the liquidity to the consumer and small business is still contracting," she said. "And it's very difficult to get the engine moving without a lot of government support within that. So when you slowly wean government supports, that's going to be the test that I think everyone's going to be watching starting in October."

Though economists generally believe the US is pulling out of a recession, unemployment remains high and most economic indicators are still showing only modest improvement.

"Where do the jobs come from?" she said. "Surely if this country becomes massively protectionist we'll build up manufacturing capability. Is that necessarily a good thing? No. There's not a lot of free capital for small business innovation—small business, period—and that's half the workforce."

Source CNBC

Sunday, September 13, 2009

Fewer Layoffs Won't Mean More Jobs

"Companies, still wary of weak consumer demand, aren't doing much hiring. The trend could keep unemployment high for the next year.

Businesses will remain hesitant to hire as long as overall demand remains subdued, and that is almost certain to be the case in the coming year. Spending in the U.S. and elsewhere stabilized last quarter, but the lion's share of growth in the second half will come from companies replenishing their depleted inventories rather than from a resurgence in demand. Plus, businesses remain keen on cutting costs and keeping productivity high. Productivity, measured as output per hour worked, soared at a revised 6.6% annual rate last quarter, and another big gain is on tap for this quarter."

Source: Business Week

Add to this issue is the structural unemployment issue. There are those in the camp that say that temporary workers will be hired back first because companies may want to test out their demand thesis for additional workforce. The problem is that many positions will never return. These are those that are affected by structural unemployment.

Employers currently in the United States have a lot of leverage in terms of their workforce. Those are still hanging onto their jobs may get increased hours which is currently at 33.1 hours worked per work week. Say if an employer needs more production, they can invite their current work staff to bang out more nuts and bolts. Hence, this will in my opinion continue to be a weak environment for hiring.

Thursday, September 10, 2009

MAN Manpower Stock Valuations

So looking at the human resource/business services sector I'll put my opinion on the current valuations of Manpower. I picked Manpower because its valuation were the most out of line with its peer group.

With the recent business outlook survey, not all markets are created equally. I still believe that their larger markets will continue to face downside risk as employment remains choppy. A large portion of their revenue comes from the European market. The US market which is about 10% of Manpower's revenue's will be the first movers in the up tick in hiring. Still conditions in the US remain flat at best for hiring, with no robust outlook for the 4th quarter. Hiring continues to be muted till firms and small businesses find that there is a solid ground for this recovery. This recovery has been mostly stimulus funded. Private businesses which make the brunt of the jobs in the United States continue to face credit limitations and conditions that are less to their liking as the yesteryear. On a macro scale jobs continue to be scare. With an average of six applicants for every free opening, this also challenges the notion that temporary jobs are coming back with a vengeance. Temporary positions also continue to be scare and at a reduced hourly workload. With the average work week of permanent employees at 33.1 hours per week, what would the average temp worker get? These are some serious structural issues that everyone needs to ponder. Many of these jobs that were lost in this recession will not come back. And many workers will need to retrain and possess additional skills to find work.

The stock trades at a lofty valuation. At seventy-one times earnings, while the industry is a negative forty-six, and the S&P trading at eighteen times earnings, Manpower is very expensive compared to its industrial peers and to the S&P. While having very poor earnings and net income growth for the past two years. Unless you feel that valuations at this point merits the lofty valuations then you may look at taking a stake, however at its current valuations there are many other companies that offer significantly more upside and more consistent growth.

Some have said that they have changed the way they value MAN to Price to Book which places MAN at 1.6, while the industry at 2.62, and the S&P at 2.1. This looks historically cheaper then its average, however you also have to take into account how depressed Manpower's business is compared to historical levels. Unemployment around the world still continues to remain at elevated levels. Either way MAN is nearing the top if not the top of their valuations.

Book value is about thirty-two plus dollars a share. While intrinsic value is about forty-two dollars. Either way you are paying a significant premium compared to its peers. Earnings and growth usually lead to price appreciation in shares. Earnings and net income has continued to decline for this past year at alarming levels. At its current valuation you can make the case that MAN is overvalued.

Debt is another issue to be on the side of caution. Manpower has over 873+ million in debt. Manpower also has over 1.1 billion in cash. This all seems well and good, however if there is a protracted decline in their revenue, and net income this cash will continue to face pressure. In this environment there are plenty of companies that are operating at zero to minimal debt trading at much less of a premium compared to the market and its peer group. This includes many technology names with faster growth then say the highly competitive human resources sector. Technology will be the driver of innovation and expansion going forward, either through increases in demand, or through cost cutting. Hiring will remain flat or a tepid bounce from its bottom.

Please do your due diligence regarding your own research on MAN. The information that I provide is just a starter to your own research. The information is out there, and I am just providing a stepping stone for this research. It never hurts to research the holdings that you hold to make sound and educated decisions for long term appreciation.

Tuesday, September 8, 2009

Manpower Employment Outlook Survey Indicates World's Labor Markets Will Still Be Challenged in Fourth Quarter 2009, but Many Headed in the Right Direc

"According to the global Manpower Employment Outlook Survey results released today by Manpower Inc., the fourth quarter of 2009 will continue to challenge job seekers in labor markets around the world, but employer hiring expectations have improved somewhat from three months ago in nearly two thirds of the countries and territories surveyed, suggesting an easing in the pattern of job cuts prevalent for several quarters. Hiring plans are strongest in the emerging markets of India and Brazil, while job prospects remain weak in the United States. However, a greater percentage of U.S. employers expect to keep staff levels unchanged in the quarter ahead, suggesting some stability. Across Europe, hiring sentiments remain generally negative but forecasts have improved in nearly half of the countries compared to the third-quarter forecast."

"Job seekers will still have limited opportunities as our data shows the world's labor markets will not experience recovery in the fourth quarter. The good news is that many markets appear to be heading in the right direction with results from 20 countries and territories showing positive movement from three months ago," said Jeffrey A. Joerres, Chairman and CEO of Manpower Inc. "Interestingly, employers in emerging markets are more optimistic about hiring compared to their counterparts in more developed economies. While a quarter-over-quarter comparison shows modest improvements in six of the G7 countries, with the exception of Canada, all are reporting negative hiring expectations. As demand for their products and services continues to be weak, employers remain very selective in their hiring process, resulting in a sluggish job market."

Employers in 17 of 35 countries and territories surveyed expect some positive hiring activity in the quarter ahead, while those in 15 report negative hiring expectations with 10 reporting their weakest hiring plans since the survey was established. Employers in 31 countries and territories are reporting weaker year-over-year forecasts. Fourth-quarter hiring plans are strongest in India, Brazil, Colombia, Peru, China, Australia, Singapore, Costa Rica, Canada, Taiwan and Poland and weakest in Romania, Spain, Ireland, Japan and Mexico.

Many employers in the 18 countries surveyed in the Europe, Middle East and Africa (EMEA) region continue to report negative hiring expectations for the quarter ahead, with employers in Poland, Norway, Sweden and South Africa reporting the only positive, but slow, hiring activity. However, compared to three months ago, outlooks improved in eight EMEA countries. In contrast, where year-over-year comparisons can be made, hiring intentions are weaker in 15 countries. Job prospects in the region are strongest in Poland and weakest in Romania.

"Eighty percent of employers in Europe are telling us they will make no changes to their staffs, which will most likely lead to some labor market stability in the fourth quarter," said Joerres. "European job seekers in the Manufacturing sector will continue to encounter a difficult market, particularly in Germany, where employers lower their hiring expectations for the sixth consecutive quarter."

Employment prospects have improved in comparison to the third quarter across six of the eight countries and territories surveyed in the Asia Pacific region. However, hiring activity is expected to be slower than historical patterns across the region. Employment prospects are strongest in India, China and Australia with the weakest and only negative outlooks reported in Japan and New Zealand. Compared to 12 months ago, employer hiring expectations are weaker in all countries and territories, most notably in Japan, India and Hong Kong.

"Indian employers have absorbed the layoffs conducted in the third quarter and are telling us they will begin hiring again at a conservative pace, but most intend to keep their workforces intact through the end of the year. Government stimulus efforts around infrastructure projects are contributing to accelerated hiring plans in India's Mining and Construction sector," said Joerres. "Meanwhile, hiring expectations in China are among the most optimistic of the year, with outlooks improving from three months ago across all industry sectors, particularly in the Finance/Insurance/Real Estate and the Services sectors."

Across the nine countries surveyed in the Americas region, hiring expectations have improved from three months ago in all countries with the exception of the U.S. and Mexico, where hiring plans of employers in both countries are at their weakest since Manpower established the survey. On the other hand, year-over-year comparisons reveal weaker hiring activity throughout the region. Manpower surveyed Brazilian employers for the first time this quarter.

"The solid job prospects in Brazil are being bolstered by the Services sector where 37 percent of employers expect to add employees in the quarter ahead. Employer optimism in Canada bounces back into positive territory with the Construction and Finance/Insurance/Real Estate sectors holding the most promise for job seekers," said Joerres. "To the south, the U.S. and Mexican labor markets continue to struggle in tandem, with the majority of employers continuing hiring freezes, opting instead to get work done with the staff they have until conditions improve."

Source: Manpower


With this report, it shows that Manpower's largest market including France, and the United States have not shown robust growth. Hence, with valuations in question be cautious going forward with this choppy return some stability.

Disclosure: No affiliation with Manpower.

Manpower Employment Outlook Survey Projects a Weak Hiring Pace for Q4 2009

"U.S. employers plan to keep their staffing levels relatively stable during Quarter 4 2009, according to the seasonally adjusted results of the latest Manpower Employment Outlook Survey, conducted quarterly by Manpower Inc.

"The hiring intentions of U.S. companies continue to be sluggish," said Manpower Inc. Chairman and CEO Jeff Joerres. "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."

Of the more than 28,000 employers surveyed, a significant 69% expect no change in their October - December hiring plans. Twelve percent anticipate an increase in staff levels, while 14% expect a decrease in payrolls, resulting in a Net Employment Outlook of -2%. After seasonal adjustment, the Net Employment Outlook becomes -3%, the weakest in the history of the survey, which began in 1962. The final 5% of employers indicated they were undecided about their hiring intentions.

"Despite some moderating signs, such as the considerable number of employers that plan to maintain or increase staff levels, there will continue to be challenges for both job seekers and employers in the coming months," said Jonas Prising, Manpower president of the Americas. "Hiring in the Wholesale & Retail Trade sector, for instance, is expected to be down in the fourth quarter, suggesting that employers will not be adding the quantity of holiday hires they have in the past.""

Source: Manpower

Fewer planning to add in the 4Q 2009

"The Manpower Employment Outlook Survey released Tuesday shows 8 percent of surveyed employers in the area plan to hire workers from October to December, while 9 percent are planning to cut employees. Three-quarters of all surveyed employers aren’t planning any change for staffing levels, while 8 percent said they’re uncertain of hiring plans.

The nationwide outlook for the fourth quarter found more employers planning to take action, though more are eyeing cuts than additions. Manpower’s national survey of more than 28,000 employers found 12 percent plan to hire, 14 percent plan to cut and 69 percent don’t plan any changes.

Manpower noted that while the majority of employers plans to hold staffing levels steady or add workers, the employment outlook for the fourth quarter was weaker for all regions of the U.S. compared with last year. The outlook for the Midwest, compared with other regions, was stable, the Milwaukee-based firm said."

Source: Business First

As I have continued to point out that growth in hiring continues to be weak. Moving along the bottom does not mean growth. It'll be interesting to see if the stimulus will lead to job growth or not. Without a temporary pop in the growth of jobs, another recession maybe coming.

Sunday, September 6, 2009

Temp Hiring Falters Again

"Job losses in August were widespread, but Joe LaVorgna, chief U.S. chief economist at Deutsche Bank noticed concerning trends in temporary employment, as well as factory hours.

LaVorgna noted that while job cuts were spread through different segments of the economy, Temp hiring, a typical leading indicator of permanent hiring, dropped by 7,000 marking the 19th consecutive monthly decline.

For some time now the recovery has been expected to be led by business, as the U.S. consumer struggles with job security, diminished personal wealth and tight credit. Though the rate of job cuts is abating, the unemployment rate is expected to remain elevated through the first half of 2010. This is worrisome for Main Street, Wall Street and Washington as each have a keen interest in seeing Americans going back to work, off government benefits, and fully able to pay bills and consuming again."

Source: Forbes

Saturday, September 5, 2009

Permanent Job Cuts

“No matter how you slice it or dice it, the U.S. economy remains fundamentally weak.”

That’s how David Rosenberg, formerly chief North American economist with Merrill Lynch, looks at today unemployment report in his daily newsletter, which he pens from his new perch at boutique investment firm Gluskin Sheff. Despite doses of government fiscal stimulus that are “dulling the pain” of contracting GDP, there is nothing the government can do about employment, writes Rosenberg, short of making firing illegal.

Sifting through the details of the Bureau of Labor’s report, details he calls “simply awful,” Rosenberg notes that 65% of companies are still cutting jobs, a “disturbing” stat, and manufacturing employment fell by 63,000 jobs in August, it’s lowest level since 1941 despite inventory replenishment that’s been widely reported.

Further, Rosenberg notes the shadow numbers, much of it buried in the “Household Survey.” The actual decline in employment was cushioned by more people working at home. Salaried workers, on the other hand, dropped 637,000, the largest decline since March. The household survey actually shows employment fell by 1 million, writes Rosenberg, if you dig into the details, “which is unprecedented,’ he notes.

Further, nine million people are now “working part-time because they have to, not want to,” adds Rosenberg. The adult male employment rate — males lost jobs at a faster rate than women in the August numbers — is already above 10% in the U.S.

Lastly, those looking for a job for more than six months without success are now a record one third of the total jobless, at 5 million, which Rosenberg argues portends a long-term trend in jobless — longer than the current downturn, in other words.

In conclusion, Rosenberg ends with some articles in The Wall Street Journal from August and September of 1930, after over a year of the Great Depression. The articles mentioned investors looking for places to put money to work in the stock market after a big 50% run-up.

“We only know now with perfect hindsight what these pundits did not know back then,” writes Rosenberg. “That there was another 80% of downside left in the bear market.”

Source: Gluskin Sheff

Friday, September 4, 2009

Less Optimistic Stance

National Small Business Association shows that its members are less optimistic as of July 7. Though the percentage of people expecting a recession in the next 12 months has decreased to 42 percent from 64 percent in December 2008, 51 foresee a flat economy and only 7 percent anticipate economic expansion.

Consumers also look for the job outlook to worsen , with 26.3 percent expecting fewer jobs in the months ahead

Source: forex

Put Warning Signs On Career Path

Human resource executives are advising college freshmen to pursue degrees in engineering, computer science or health care if they want to boost their chances of being hired after graduation. The survey of 150HRexecs by global outplacer Challenger Gray & Christmas urged students to avoid careers in law, marketing/advertising and, ironically, human resources. Only 2% of HRexecs thought human resources would be worth pursuing in college.

“This recession may have many freshmen second-guessing career plans. Certainly those who were contemplating a future in financial services or homebuilding may be looking for new options,” said firm principal John Challenger.

Structural rather than cyclical influences on unemployment are running well above normal during the current recession

Structural rather than cyclical influences on unemployment are running well above normal during the current recession, as is highlighted by the percentage of the unemployed that are “not on temporary layoff.” 

Data from the Bureau of Labor Statistics

show that 53.9% of the unemployed were not on temporary layoff in August, up from 39.1% a year earlier and well above the 30-year average of about 34%.  The current level is well above the peak of previous cycles, which tended to move above 40% and was as high as 44.9% in May 1992. Many job losses are occurring in industries with broken business models and jobs won’t return quickly.  This will put downward pressure on wages.

Source: Bloomberg

France’s unemployment rate climbs

"France’s unemployment rate climbed to the highest in at least three years in the second quarter as companies cut jobs in an effort to squeeze costs after the worst recession since World War II.

The jobless rate rose to 9.5% from a revised 8.9% in the first quarter, Paris-based statistics office Insee said today. Excluding France’s overseas territories, the unemployment rate increased to 9.1% from a revised 8.5% in the first three months of the year.

While France exited a yearlong recession in the second quarter, with gross domestic product expanding 0.3%, economists expect more job cuts as companies implement decisions taken when the economy was shrinking.

“Assuming the turning point in the economy came in the second quarter, that would imply unemployment peaking at the beginning of 2010 at the earliest,” Laurent Bilke, an economist at Nomura International in London, said by phone before today’s report. “Jobs decisions are very heavy, they’re the last thing you adjust.”

Companies such as Alcatel-Lucent SA and Air France-KLM Group are trimming their workforces to match weaker sales triggered by the recession.

Almost 700,000 jobs will be shed in 2009, Insee forecast last month. So far this year, 420,900 jobs have been lost, according to Labor and Finance Ministry numbers.

The government is preparing for further job cuts this year by hiring employment agencies to help jobseekers find temporary work. In June, the Finance Ministry began offering 1,000 euros (1,428) to companies for every person hired as an apprentice in an effort to combat youth unemployment. The measure is scheduled to remain in place for one year."

Source: Reuters


This is an interesting piece. During the last conference call, Manpower said that the French market has stabilized. It will be interesting to hear Manpower provide more color regarding their French market where they are the market leader if they indeed see this market stabilize. The European market continues to see high unemployment rate and bleak signs of an upturn. Although France and Germany have seen an up tick, it remains to be determined to see if this is sustainable.

U.S. unemployment rate jumps to 26-year high of 9.7%

"The U.S. unemployment rate jumped to a 26-year high of 9.7% in August as nonfarm payrolls fell by 216,000, the 20th consecutive monthly decline, the Labor Department estimated Friday."

"U.S. payrolls have dropped by 6.9 million to a total of 131.2 million since the recession began in December 2007, the government data showed. Unemployment has increased by 7.4 million during the recession to stand at 14.9 million. 

"Joblessness continues to mount, which will only make it harder for households to repay debt and build savings, thereby impeding a consumer-led recovery," wrote Sal Guatieri, senior economist for BMO Capital Markets."

Source: Marketwatch 

August 2009 Employment Report - BLS

Source: http://www.bls.gov/news.release/empsit.nr0.htm

Thursday, September 3, 2009

Unemployment Rate By State and County

Visit this site to check on how your county and state are doing in terms of government unemployment numbers. 


Source: Google

Hay's 2009 Annual Earnings

Financial highlights
  • Difficult market conditions, particularly in the second half, resulted in a reduction in Group fees and profit
  • Increase in cash generated by operations to £260.9 million, primarily due to unwind of working capital
  • Strong balance sheet with net cash of £0.7 million (2008: net debt of £81.1 million)
  • Dividend maintained at 5.80p
Operational highlights
  • Temporary placement net fees down 7%* and permanent placement net fees down 29%*
  • Advantage taken of opportunities in resilient markets particularly in the public sector and Germany
  • 24% reduction in cost base in June 2009 versus June 2008 following early and continued action taken to protect profits
  • Selective development of the International business, now representing 51% of Group net fees
  • Investing for the long term including key IT efficiency projects and corporate account development

* LFL is like-for-like growth, which represents organic growth of continuing activities at constant currency. There were the same number of trading days in 2009 and 2008.

Commenting on these results, Alistair Cox, Chief Executive of Hays, said:

"The recruitment markets in the past year have been the most challenging on record. However, Hays has performed creditably due to our scale, the strength of our market positions, our early action to address the cost base and our ability to redirect resources to more resilient sectors such as Education, Healthcare, Oil & Gas and Pharmaceutical. We are also continuing to gain market share across the world and are investing in new markets including India and Russia. In addition, we are very pleased to have signed a series of significant recruitment contracts with leading global companies drawing on the full range of our expertise.

Currently we are seeing initial signs of stability in the United Kingdom and Asia Pacific markets although no indications of recovery. The Continental European markets, which entered the downturn later than the other regions, are still experiencing deteriorating conditions. Whilst we anticipate that 2010 will be another tough year for our industry, we will continue to take advantage of the downturn to build market share and pursue our investment plans to strengthen our operations for the long term. We are managing the short term whilst investing for the long term.

Source: http://www.haysplc.com/hays/media/releases/2009pr/2009-09-03/

Spain unemployment hit 17.9% for 2Q 2009

The Spanish unemployment rate hit 17.9% at the end of the Q2 2009, according to Spain’s National Statistics Institute (INE), the highest level in the eurozone and well above the 8.9% average of the 27 EU member states. In fact, Spain makes up over half of the past year’s increase in eurozone unemployment, with over 30% of the eurozone’s jobless living in Spain. The Organization of Economic Cooperation and Development (OECD) predicts that Spain’s jobless will reach 20% of the workforce during 2010, gradually edging closer to the historic high of 24% recorded in 1994. Youth unemployment is particularly severe, with one in three workers under 25 years old facing a prolonged period out of work. At the end of the Q2 2009, Spain’s GDP was down 4.1% y/y with domestic consumption expected to fall 4.5% by the end of 2009.

The large number of unemployed not only presents obvious economic difficulties for Spain such as falling productivity and a heavy drag on demand but the social consequences are also being felt. Protests have erupted across Spain as citizens struggle to deal with the economic crisis. Jobs have become the primary concern for the electorate, overtaking terrorism at the start of the year. Every country across Europe has suffered from the economic contraction. Yet Spain’s catastrophic housing collapse and towering unemployment figures make its plight stand out. The downturn has been aggravated by Spain’s rigid, antiquated and embedded labor regulations. As Luis Garicano of the London School of Economics argues, “that the crisis has hit Spanish employment disproportionately is due to the catastrophic way the labor market works.” Unless action is taken to remedy the underlying causes of Spain’s unemployment crisis, the country faces a prolonged and dire recession.

Source: RGE

Ira Schnell at Kaufman Bros. "Morning Note"

After showing some cracks in the foundation over the last few days, I got the sense yesterday that people were content to look for further evidence of a breakdown before they need to start kicking out their longs and/or laying the shorts out again….Almost like everyone was waiting around looking for someone else to make the first move…Certainly cant blame institutional or retail investors for acting this way, because over the last few months, if you sold after initial cracks in the foundation formed, you got very burned.

Combine that with the fact Labor Day is fast approaching, and maybe we get a pause here before the next move (unless Friday’s non farm payroll # is way off consensus, in either direction)…And after virtually 6 months of equities going straight up, I don’t think you can discount the fact that even if they are going to unwind this thing, you might get one last sucker rally right back through 1010 to 1020, before they finally hit this thing through 970 to 980….I talked yesterday about the key role plain vanilla long only funds will ultimately play in dictating price action if selling momentum increases as we roll into 4Q09 (will they buy on the way down or turn sellers?)…Wanted to throw out one more piece of the puzzle…Short sellers have been taken out on stretchers for months now….I know most have been burned to the point that they would rather short only on weakness than try to top tick this market and run the risk of getting steamrolled (again).

So my point here is if the snowball starts to roll down the hill with regard to sell momentum, and the shorts get in motion, what are there expectations for that trade?.....It seems to me that when you get smoked repeatedly with the same strategy, and that strategy finally starts to work, it is human nature to close out the trade too early and lock in your profit, because you just want to right (I am certainly guilty of that on a personal level)…

And not sure that is all that atypical…So what am I saying here?...I think if this market does come off, short covering should come into play maybe a bit earlier than it would normally, thus stemming the down move (at least initially)….Combine that with a 6 month uptrend which has been firmly entrenched, and I think you could certainly make the case the above scenario might take place…

Although it appears that most of the heavy bleeding in the unemployment picture in the US is behind us, the #’s just don’t paint any kind of picture the biggest problem plaguing this economy has abated…The ADP # yesterday still demonstrates that people are losing their jobs at a pretty healthy clip…And the other huge missing piece of the puzzle (the actual hiring of people) still seems like it is very far away….In fact, I saw something the other day that illustrates this point pretty well…The Robert Half Financial Hiring Index says that 84% of CFOs surveyed have no plans on hiring for the rest of 2009….4% expect to add staff, and 10% see more cutbacks (actually up from 8% from the last survey)….Look out for initial claims out @ 8:30 (consensus is 565k, and consensus for continuous claims is 6.125mil), followed by the ISM non manufacturing out @ 10:00 (consensus is 48).

Source: Kaufman Bros.

More Americans Than Anticipated File Jobless Claims

"Sept. 3 -- More Americans than anticipated filed jobless-benefit claims last week, indicating companies remain focused on cutting expenses as the economy emerges from its worst recession since the 1930s.  

Applications fell by 4,000 to 570,000 in the week ended Aug. 29, exceeding the 564,000 median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. The total number of people collecting unemployment insurance climbed. 

“We’re not making much progress in terms of the layoff picture,” said Jonathan Basile, an economist at Credit Suisse Holdings USA Inc., which correctly forecast the first-time filings figure. “These levels of initial claims are still consistent with declines in payrolls.” 

Manufacturers are still cutting staff. Whirlpool Corp., the world’s largest appliance maker, will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs as the housing slowdown hurts demand."  

Source: Bloomberg

Wednesday, September 2, 2009

Private sector sheds 298,000 jobs in August: ADP survey

"WASHINGTON -- Employment in the U.S. private sector fell by 298,000 in August, according to the ADP employment report released Wednesday. 

The drop suggests nonfarm payrolls may sink by more than the 250,000 anticipated by economists ahead of the government's much-anticipated report due out Friday morning."

Job creation is a problem right now. Especially, when a majority of the businesses in the United States are small businesses. With trouble attaining credit and capital to fund and expand their businesses, or even to have it stay afloat job growth will continue to be a problem.

With further job losses and unaccounted for discouraged workers, and part-time workers in the fold, this economy will not rebound at a staggering pace any time soon.  I look forward to Friday's numbers.

Source: marketwatch

Tuesday, September 1, 2009

Job Losses Are Not The Problem

"The fact is, job creation and job destruction take place during booms at rates that are not dramatically different from the rates during recessions. It’s just the difference between the two that changes. In a typical boom quarter, about 7 million jobs are destroyed, and about 8 million are created. In a typical recession quarter, about 8 million are destroyed and about 7 million are created. There just isn’t much support for the idea that recessions give us a special ability to reallocate resources more intensely than we do during a boom or a period of normal growth. “Creative destruction” is a dynamic process that continues all the time, not one that occurs in separate phases of creation and destruction."

Source: http://blog.andyharless.com/2009/08/job-losses-are-not-problem.html

Monday, August 31, 2009

Kelly Services falls on comparative performance

"Stifel Nicolaus analyst James Janesky said in a client note that he views all staffing and employment-related stocks unfavorably "amid continued weakness in the employment market and (we) believe there is potential for our entire ... group to pull back from current levels following the sharp run-up from early-March lows."

"Analyst Ty Govatos of C.L. King & Associates said the stocks could rise twofold or more as business improves in the next two to three years, but he cautioned that his calculations do not include risks that could halt the stocks' climb.

Kelly Services Inc., Manpower Inc. and other staffing companies will likely not perform as well as other companies, though they could still climb between 70 percent and 115 percent, he said in a client note."

Source: AP

Basically, I've been harping on the point that these employment, human resource stocks have been mostly overvalued. With such declines to their revenue and net income compared to the boom present in 2007, there is no way these companies such as Kelly Services and Manpower deserve such multiples.

The multiples that these stocks are trading at are mind blowing considering their businesses have faced tremendous downwards spiral since the 2007 boom.

Sales growth, earnings, operating margins have continued to decline and have only stabilized at a bottom. Rather then drive earnings the recent run up has been purely on speculation that we are entering another growth phase. With governmental debt at an all time high, and growth primary coming from government stimulus spending rather then from the private sector, consumers will continue to feel the brunt of this downturn.

End result is low levels of manufacturing. Tepid demand.

Euro zone joblessness at 10-year high

"In particular, higher unemployment lowers the ability of workers or unions to negotiate big wage increases -- and with a time lag between rising unemployment and wages, this downward pressure on inflation may continue for a long time to come."

"Spain had Europe's highest unemployment rate in June at 18.1 percent, followed by Baltic nations Latvia at 17.2 percent and Estonia at 17 percent. A third of Spanish under-25s can't find a job, it said.

Jobs are disappearing in all EU nations, Eurostat said, but Germany has seen the smallest rate of increase in its employment rate over the year, growing from 7.3 percent to 7.7 percent.

"Expect unemployment to rise further well into 2010," said Jorg Radeke, economist at the Centre for Economic and Business Research."

Source: AP

Unemployment Around the World

Source: VisualEconomics

Cloud over U.S. payrolls: job hunters take summer off

"WASHINGTON (Reuters) - Better-than-expected July jobs numbers have numerous private economists heralding the end of the recession, but the Obama administration is taking a more guarded view because of a worrisome rise in long-term unemployment and a drop in labor force participation."

""We believe this drop in joblessness will prove to be temporary. With the summer in full swing, we assume a larger than usual number of unemployed Americans decided to take a break from job hunting," said Bernard Baumohl, president of the Economic Outlook in Princeton Junction, New Jersey. "It's been a horrible labor market, so who could blame them?"

Source: http://www.reuters.com/article/businessNews/idUSTRE5765FG20090807

Sunday, August 30, 2009

Four Reasons That Unemployment Will Recover Slowly

- Consumers Are Still Scared: The Consumer Confidence Index that measures the mood and outlook of American consumers fell unexpectedly in July. While this number doesn’t tell the whole story, it’s clear that consumers remain nervous and economic recovery will be slow without consumers feeling good and spending money again. Sales are down significantly in most industries and most companies have used layoffs as a tool to cut costs to offset lagging sales. Until the consumer returns, businesses won’t be able to afford additional workers.

- Employers Will Help Existing Employees First: Most companies have been forced to take measures that have hurt their employees in some way during this recession. Workers used to working 40 hours a week suddenly found their hours cut in half. Benefit packages were reduced as employees experienced pay freezes and lost health benefits, 401K matches, and other key benefits of employment. Before employers open additional positions and start hiring new workers, many will want to take care of their current employees first. Hours, benefits, and compensation packages, will be restored in many companies before there is room for more headcount. A recent survey showed that 33% of employers plan to unfreeze salaries in the next six months and 79% plan to do so in the coming year.

- Some Industries Are Still Cutting Jobs: The recession has affected every industry differently. Some that experienced major difficulty early on made changes near the beginning of the recession and are now in a position to rebuild. Other industries hung in there month after month as the economy worsened and have started cost cutting measures more recently. While layoffs are down significantly, they’re not over and the jobs added to the economy in the coming months will likely be offset by jobs being lost in different lines of business.

- Employers Remain Cautious: Most businesses have been affected by recessions and downturns in the economy before, but this was no ordinary recession. As far as recessions go, it was violent and many of us were shocked by its severity. Even as there are signs of recovery being reported in economic numbers, employers that are still shell-shocked will not be looking to rebuild aggressively and are likely to approach their businesses more conservatively in the coming months.

David Wise, a business consultant with Hay Group, probably summed up the attitude of hiring managers best when he said, “Most companies want to go into fiscal 2010 with the layoffs and salary freezes behind them. The worst thing a company can do after tough times is loosen the reins before the horse is ready to run

Source: VisualEconomics

Thursday, August 27, 2009

Japan unemployment hits new high

"Companies are continuing to lay off workers even though the economy has returned to growth after the most bruising recession for decades. "


Source: BBC

Monday, August 24, 2009

Meltdown 101: State unemployment by the numbers

15 percent: Michigan's unemployment rate, the nation's highest
12.7 percent: Rhode Island's unemployment rate, the second highest
12.5 percent: Nevada's rate
11.9 percent: California's rate
11.9 percent: Oregon's rate
4.2 percent: North Dakota's unemployment rate, the nation's lowest
4.9 percent: Nebraska's rate, the second lowest
4.9 percent: South Dakota's rate
6 percent: Utah's rate
6.5 percent: Wyoming's rate
6.5 percent: Oklahoma's rate
62,100: Jobs added in New York in July
38,100: Jobs added in Michigan
37,900: Jobs added in Texas
15,600: Jobs added in Tennessee
13,200: Jobs added in District of Columbia
35,800: Jobs lost in California
26,400: Jobs lost in North Carolina
25,200: Jobs lost in Florida
13,000: Jobs lost in Illinois
10.5 percent: Unemployment in the Western region
10.2 percent: Unemployment in the Midwest
9.3 percent: Unemployment in the South
8.7 percent: Unemployment in the Northeast

Source: CNBC

Thursday, August 20, 2009

U.S. jobless claims rise by 15,000

WASHINGTON (MarketWatch) -- Initial claims for state unemployment benefits rose by 15,000 to 576,000 in the week ending Aug. 15, the Labor Department reported Thursday. It was the highest level since July 25. The four-week average of initial claims also rose, by 4,250 to 570,000, and continuing claims climbed as well. For the week ending Aug. 8, continuing claims rose by 2,000 to 6.24 million. It was also the highest since July 25.

Source: marketwatch

Wednesday, August 19, 2009

The U.S. Economy: Time for a Real Jobs Stimulus?

"Indeed, the current situation is stark. When people say there are no jobs out there, it's true. According to the Bureau of Labor Statistics, at the start of the recession in December 2007, the ratio of job seekers to job openings was 1.5 to 1. Now six unemployed workers chase every available job. It's a brutal game of musical chairs in which a great many people lose and spiral downward economically with disastrous consequences, not only for themselves and their families, but also for communities that were once productive and prosperous.

The Obama Administration and economists hailed the dip in July unemployment to 9.4% from the 9.5% level in June as an indication that the economy is beginning to recover. But the drop in unemployment is deceptive. Employers shed another 155,000 jobs in July. And the unemployment rate would have gone up, possibly to 9.7%, if the 400,000 Americans who had previously been searching for a job (but became so discouraged they stopped) had continued to seek employment in July. Economists expect the job picture to remain bleak well into 2010.

The standard unemployment number excludes both those who have given up looking for a job and those who have taken part-time jobs but want full-time work. Include them and the number jumps to 20% or higher in states such as Michigan, California, Rhode Island and Oregon, with Tennessee, Nevada and other states in the high teens.

Why isn't the $787 billion stimulus bill helping unemployment? It was never designed to be a jobs program. Instead it is an ambitious policy prescription to restart — and redirect — the economy in new directions over the next three years. Stimulus spending is not a fast-infusion jobs program, nor is it always targeted toward the hardest-hit states. For example, stimulus road-building largely bypasses large metropolitan regions where antiquated infrastructure snarls traffic to focus on rural areas and smaller states.


Source: Time

Tuesday, August 18, 2009

Job Search Firms: Big Pitches at Big Fees, but Few Jobs

"“Career management” or “career marketing” companies like ITS, which charge large up-front fees, are easy to stumble upon on employment Web sites. Often, as in Mr. Fischman’s case, they contact job seekers after they post their résumés. They usually focus on professionals and managers, massaging their egos by boasting that they accept only the most marketable candidates. Some companies place advertisements that appear to be job postings but instead are lures for sales pitches."


Source: New York Times

Be careful everyone when it comes to job agencies that lure you with amazing jobs if they ask you for an upfront "search" fee.

Sunday, August 16, 2009

FDI Falls in China

Foreign direct investment in China fell for a tenth straight month in July as companies stalled expansion plans amid the global financial crisis. 

Investment declined 35.7 percent from a year earlier, the commerce ministry said at a briefing in Beijing today. That compared with a 6.76 percent drop in June. 

Source: Bloomberg

This can be a problematic especially when the fastest growing economy in the world is not receiving as much foreign direct investment as they did last year. The government is providing loans to the locals, however this can only last so long as their monetary policy sees fit. FDI is the true growth driver for many emerging economies. Another reason to be cautious with this global recovery. Times are getting better, but not enough to feel that your job is safe, and that the good times are back.

Friday, August 14, 2009

Manpower received a revised rating from Moody's

"Moody's Investors Service downgraded Thursday the long-term debt ratings of Manpower Inc. to Baa3 from Baa2, saying the staffing company's profitability is expected to weaken further this year amid the recession.

The ratings agency also said Manpower's ratings outlook is stable, based on anticipated year-over-year revenue and profit declines in the last two quarters of 2009, driven by continued sagging demand for permanent-placement and temporary labor.

Moody's said the ratings anticipate modest revenue and profit growth in 2010 as global economies stabilize.

"The downgrade of Manpower's long term ratings reflects Moody's expectation that profitability, leverage and interest coverage metrics will continue to weaken sharply during the remainder of 2009 and will not recover to pre-recession levels over the next two years," Lenny Ajzenman, Moody's senior vice president, said in a statement.

"Manpower derives the majority of its revenues from Europe and we expect labor market conditions to remain difficult in key European markets into 2010," he said.

Manpower reported a 27 percent organic constant currency revenue decline in the second quarter of 2009, though signs of stabilization appeared in key markets such as Italy, France and the U.S.

The agency said Manpower has $1.1 billion of cash and cash equivalents -- compared to $873 million of funded debt -- which gives the company a solid liquidity cushion during a cyclical trough in the staffing business.

It also said Manpower benefits from a leading global market position and trends that support the long-term growth of the staffing sector.

Moody's downgraded Manpower's senior unsecured notes of Euro300 million due 2012 and its senior unsecured notes of Euro200 million due 2013 to Baa3 from Baa2."

Source: AP

Thursday, August 13, 2009

Jobless Claims Rise to 558,000 in the United States

"Better-than-anticipated reports on manufacturing, housing and employment indicate the deepest job cuts may have passed. At the same time, while analysts surveyed by Bloomberg News say the government’s stimulus spending will spur economic growth as of this quarter, they predict it won’t stop the jobless rate from reaching 10 percent and restraining consumer spending.

“The job market is no longer skidding out of control,” Carl Riccadonna, a senior economist at Deutsche Bank Securities Inc. in New York, said before the report. Nonetheless, he said, “while the stimulus is helping the economy gain traction, we’re not going to see a massive ramp-up in hiring because of it.”"

Source: Bloomberg

Although, we are seeing an improvement in the global economy because of stabilization. We are not seeing massive ramp up in growth as the market dictates. For employment to continue to improve manufacturing and consumer spending in the United States has to improve. Consumer spending still remain in depressed levels as there continues to be weak demand in high end products. I would continue to be cautious till more evidence from the government stimulus creates "real" jobs that provide evidence for the economy.

Wednesday, August 12, 2009

Why You Can't Trust Those Jobs Figures

There was an interesting piece in Forbes (which I normally don't read) yesterday regarding the jobs numbers. It seems pretty clear cut to say that nobody should really trust these unemployment numbers. As they don't tell the whole truth of the unemployed.

"He says the U.S. is in a depression, and though the economy may have hit a “plateau,” it’s not about to rebound, as many stock investors apparently assume."

"Williams also doesn’t buy the official unemployment rates, which are based on a separate survey from the one used for the payroll numbers. He notes that in calculating its broadest jobless rate, the so-called "U-6," the Labor Department in 1994 stopped including unemployed workers who had stopped looking for a job for more than year. As this recession drags on, and despair over finding jobs mounts, that’s likely to distort the true labor picture.

The Labor Department reported Friday that the jobless rate in July was 9.4%, one-tenth of percentage point lower than in June. The U-6 rate, which includes frustrated part-timers as well as those who have stopped looking, also fell slightly, to 16.3%. Williams figures that broader rate hit 20.6%, 25% higher than the government figure."

That's a very depressing sign if rates are actually as high as Williams suggests. Shadowstats has the same depressing outlook for the jobs market. I would even suggest that this temporary blip in hiring will face downwards pressure as once the stimulus runs its course. There is still plenty of risk that we might have to hit a double bottom in our economy to continue to weed out the excess capacity.


Monday, August 10, 2009

Adecco post lost second quarter

"Aug. 11 -- Adecco SA, the world’s largest supplier of temporary workers, reported a surprise second- quarter loss.

Adecco’s net loss was 147 million euros ($208 million), as it took 246 million euros in charges for impaired goodwill and job cuts, the Glattbrugg, Switzerland-based company said in a statement today. Analysts surveyed by Bloomberg had predicted net income of 32.8 million euros. Sales fell 31 percent to 3.6 billion euros in the quarter."

Source: Bloomberg

The numbers continue to be quite weak for the recruiting industry with no near term growth. Some pockets of strength and stablization, but that does not mean that growth is coming back. Especially, when many of these jobs are turning to in house recruiting.

Say for example the financial uptick in hiring. Although there is an uptick this does not mean that there is a continued longer term trend in hiring, just selective and longer term outlook for hiring.

Sunday, August 9, 2009

Analyst getting it wrong

Analyst have a difficult time predicting future trends. Hence, be careful with estimates as nobody can really forecast the future. Remember the housing bubble, and all the other bubbles we have faced.

Source: Clusterstock

United States faces zero job growth

Over the last 10 years the U.S. continued to decline to its current levels of no job growth.

This will continue to be the case until there is a fundamental shift in our workforce as it becomes more and more service oriented. Many of these manufacturing jobs have shifted overseas. While there continues to be weak demand by the consumer here which reduces any visablity for a longer term buoy economy.

Please check out the chart regarding the weak demand for temporary services.

Source: http://www.nytimes.com/imagepages/2009/08/07/business/20090808_CHARTS_GRAPHIC.html

Friday, August 7, 2009

Manpower Valuation Analysis

With the recent run up in staffing firms lets look at the valuations of Manpower since it seems to be the most expensive based on P/E both current and forward P/E.

MAN earns an overbought score of 88 out of 99.
50 day moving average at 44.03.
P/E at 66.40.

I'm still trying to figure out how MAN valuation even when you take into account P/S that it is valued over the present analyst price target.

Moody's also put Manpower on credit watch as earnings have fallen through a cliff compared to last year. Although they can manage their debt in the short term with their cash pile, MAN will face continued challenges as other business service providers are more nimble to grow its business with Manpower's mounting debt.

I continue to like RHI (Robert Half International) as valuations are better poised to sidestep this continued credit crisis. The minimal debt is advantageous to RHI position in the near term.

I would like to see more stabilization on Manpower's larger revenue generating markets. Developed nations such as Australia continues to face a soft market. I would cut as much staff there, and / or hours till they see more short term demand. As it seems that they are not optimizing there team. At least MAN is aware that Australia is under performing. Hugging the bottom doesn't mean that there is job growth. Hence, the cautious approach with MAN's valuation.

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