Scammers target desperate job seekers

There is an interesting article from the Los Angeles Times regarding scams in this difficult work environment.

http://www.latimes.com/business/la-fi-job-scams-20101024,0,2286668.story

So be careful when seeking something that maybe too good to be true.

Jobless Update

Here's a great look at what the offical numbers tell in terms of job losses in the United States.

http://online.wsj.com/article/SB10001424052748703946504575470001733933356.html?mod=e2tw

Sector Updates

With recent release of 2Q 2010 earnings, I've like to touch on a few points.

It was good to see that revenue ticked up for most of these corporations. Although, I'm still cautious with the early developments of austerity measures in Europe, and the looming regulations and tax regulations in the United States, revenue did improve for the staffing sector.

Profitability does leave something to be desired, until there robust action in terms of revenue that is sustained in a normalized recovery, I am cautiously optimistic on the sector.

June 2010 Unemployment 125,000 Shed

The US continues to face challenges in its labor markets.

125,000 jobs were cut. While the private sector added a less than robust 83,000 jobs. Consensus estimate were for the creation of 110,000 jobs in the private sector.

Over 652,000 people left the labor force.

Average work week hours also declined, from 34.2 to 34.1 hours worked.

The economy continues to experience significant headwinds with cuts from the delayed decision of extended unemployment benefits, to the possible future austerity measures that the US may follow the rest of the world. Time will tell if there will be another jobs bill to stimulus the sluggish recovery.

2009 Unemployment Duration in the United States by State

From the NY Times, unemployment duration in the United States by state. Still a very difficult climate for hiring in the United States.

Italy Facing Persistent Unemployment If Recovery

Bank of Italy governor Mario Draghi warned in a key speech Monday that unemployment in the country is likely to stay persistently high as economic recovery remains slow.

He said the financial crisis had weighed disproportionately on young people. Unemployment in Italy, for people between the ages of 20 and 34, reached an average of 13% in 2009, he said.

The national rate is 8.6% in March.

Starting-level salaries haven't changed much in 15 years, he added.

"A slow recovery increases the probability of persistent unemployment", Draghi said. "This condition, especially at the beginning of a professional career, tends to be associated with permanently lower salaries in the future".

Source: Dow Jones Newswire

RBS analyst Bob Janjuah states his views

RBS analyst Bob Janjuah was quite temped in his views of the global growth story.

Bob Janjuah states that a massive turnaround in corporate behaviour in leverage, capex, investment, hiring and spending binge is extremely unlike for now and for the rest of this year.

This is a pretty honest assessment after all the rose colored glasses calls of a buoy hiring landscape for the staffing firms. However, premenant placement has barely budged from historical levels, and consumers continue to be selective on their purchasing behavior.

The U.S. also revised its GDP downwards to 3.0% rather than bullish estimates from firms such as Goldman Sachs of 3.7%. Besides that unemployment claims also missed estimates.

May 15 2010 Unemployment Survey Week

With today's release of the unemployment claims for survey week May 15, 2010, claims were above consensus.

471,000 vs. expectations of 440,000.
Continuing claims were also above expectations 4,625,000 vs. expectations of 4,610,000.

Unfortunately, unemployment claims will continue to rise. With the Census staffing most probable ending June 30, 2010 expect a dramatic uptick in weekly claims, and continuing claims.

Besides that business confidence, and continued worries in the Euro Zone, and the lack of collective reasoning in Europe may possibly spread and cause significant slowdowns across major regions of the world.

I have touched on this mainly on Robert Half International's largest segment is the United States , however other staffing groups have also seen very minimal uptick in hiring compared to historical rebounds in the economy. I remain very cautious, and a decline in the economy is more than probable at this point.

Source: DOL

http://www.dol.gov/opa/media/press/eta/ui/eta20100682.htm

Employment Trend Index rises - April 2010

The recovery in the labor markets is broadening out, according to a report released Monday by the Conference Board.

The board said that its April employment trends index increased 0.9% to 94.7, from a revised 93.9 in March, first reported as 94.4. The index has risen for eight consecutive months and is up 7.1% from a year ago.

The ETI report follows last Friday's government employment release that showed nonfarm payrolls increased 290,000 last month.

Despite that strong job gain, the board remains cautious about the jobs outlook.

"The employment trends index continued to rise in April, but its rate of growth has slowed in recent months," said Gad Levanon, associate director.

Source: Dow Jones Newswire

Robert Half RHI Q1 2010 Earnings

Robert Half International (RHI) reported Q1 2010 earnings. Robert Half International reportedly missed earnings of .05 vs. analyst estimates of .06.

Revenue was also light of estimates. Q1 2010 revenue $737.2M vs. analyst consensus of $750.76M. Robert Half International although it sustained through the down draft of the financial crisis continues to face slack demand in all components of the company.

When valuations have risen as fast as they have, and demand has been lukewarm from the cyclical bottom, these temporary, and staffing firms continue to produce fairly weak margins.

I continue to see this sector as overvalued relative to the S&P's earnings.

Manpower MAN 2010 Q1 Earnings

Manpower recently reported 2010 Q1 earnings.

Manpower beat the estimates as an analyst from S&P raised their estimates. While Manpower lowered their estimates for the next quarter to set the bar lower ahead of it's acquisition of COMSYS.

The problem with the the increase is primarily the continued weak profitability in Manpower's numbers.

Operating margins in all regions experienced flat to slightly negative operating margins.

With the increase in revenue growth all MAN managed was sub two million in profits. If there is any downturn, and a majority of the analysts have not priced in what a Greece, and PIIGS default would cause to Manpower's underlying business with a bulk of their revenue coming from the European nations. Out of all the majorly traded staffing firms on the NYSE, MAN has the most underlying risk with such a sizable stake of it's business from Europe.

France has a large stake of its bonds in Greece, with over 700+ billion. If Greece were to continue to find itself in limbo, France may find it's own economic growth in jeopardy.

Small businesses don't see recovery panning out

NFIB index dipped from 88 to 86, and has been below the 90 level for 18 consective months.

"According to the NFIB's latest survey, most owners think business conditions will not improve in the next six months, few are hiring, and fewer than usual are investing in their business. "

Source: http://www.nfib.com/tabid/565/Default.aspx?cmsid=51254

TriNet Human Capital Index Employment Unemployment

TriNet released their latest monthly reading regarding employment today. Even as their are readings of green shoots in the economy, TriNet survey speaks otherwise. Their latest reading points to flat employment, rather than growth.

Source: TriNet

Innovative small technology and service companies slowed hiring against
broader U.S. averages during March, and while layoffs rose slightly, they
remained well below last year´s highs. Net employment growth appeared flat in
March, which may indicate that companies are waiting for signals about the
broader business climate.

Underemployment Rises to 20.3% in March 2010

The trend of the underemployed has risen to 20.3% from 19.8% (February).

http://www.gallup.com/poll/127091/Underemployment-Rises-March.aspx

Although, employment has slightly ticked up, the US continues to experience a structural change in employment. These structural changes take years to right its ship.

An environment of higher dollar, increased regulation, and health care costs, and taxes usually do not fuel a booming economy. Time will tell if the economy can continue to make gains.

Source: Gallup

Unemployment Rises in 27 States, Drops in 7 States February 2010

Twenty-seven states recorded over-the-month unemployment rate increases, 7 states and the District of Columbia registered rate decreases, and 16 states had no rate change, the U.S. Bureau of Labor Statistics reported today.

Over the year, jobless rates increased in 46 states and the District of Columbia
and declined in 4 states. The national unemployment rate in February, 9.7
percent,remained unchanged from January, but was up from 8.2 percent a year
earlier.

Mish had an interesting piece on the unemployment picture in the US. Although, the employment picture has mildly risen from the bottom, unemployment continues to remain at elavated levels.

Source: Mish Economic

Manpower (MAN) Staffing Updated Valuations March 2010

After pouring over some of the recent competitors and Manpower's latest earnings. Some of the metrics has changed, and some metrics still remain fairly cautious sign of the state of affairs with Manpower.

As Manpower has increased their earnings, valuations have come down. However risks are abound.

I'll provide some near term pros and cons of the stock, please do your own research, as this is not a recommend for the purchase or sale of the securities. I'm only providing my own research.

+ Near term improve in debt. Debt levels has narrowed to 757 Mil.
+ The pending acquisition of IT provider Comsys.

While there are some positive catalyst in places, risk still remains.

-While I am positive on the acquisition of Comsys, Manpower's ability to generate return on invested capital has been very limited. Manpower's return on invested capital is 0.92.
- Weak staffing levels in Europe, with risks associated with the Euro and the debt crisis which risks growth in the European Union. This remains a wild card as analysts from what I've read have not priced the risk of a currency implosion by the Euro. With the IMF, and non bipartisan support through the EU, Manpower's largest industrial partners France and Germany will be somehow affected longer term by the turmoil within the PIIGS. Risks either due to spending cuts, reduced spending by consumers, and increased debt obligations by specific countries.
- Continued pressure on valuations near term with MAN trading at 82.6x earnings, while the S&P500 trades at 11.7, historically MAN trades at a historical p/e of 29.0.
- PEG continues to trade well over one, and has risen back to 5.51.

Two worrisome metrics that continue to place MAN at risk, as business continue to face hurdles:
Historic trends of MAN receiving payment are at elevated levels:

- Days Sales Outstanding

Year

2000 67.2
2001 69.9
2002 71.1
2003 72.3
2004 71.4
2005 73.0
2006 73.2
2007 74.0
2008 68.7
TTM 83.8

- Days Inventory Payable Period

Year 2000 17.4
2001 17.9
2002 17.4
2003 18.2
2004 18.7
2005 19.1
2006 19.9
2007 20.9
2008 20.1
TTM 28.8

As stated there continues to be risk as MAN is having difficulty collecting payment compared to historic levels. I continue to be cautious as Manpower continues to face hurdles within its largest market (France), and pressure with labour regulations and unions in Europe.

The increasingly likely bailout of Greece, and possibly Portugal will have ramifications throughout the EU. The EU has historically been one of the slower growth areas in the global arena. With these spending and debt restructuring Manpower faces increased challenges, even as the global economy bounces from the bottom.

US Small-Business Optimism Falls FEB 2010

Small-business owners in the U.S. turned slightly more pessimistic in February, although employment readings--from the U.S.'s main source of new jobs--grew a shade more positive.

The Small Business Optimism Index lost 1.3 points to 88.0 last month, reported the National Federation of Independent Business in a press release Tuesday.

The NFIB noted that only two of 10 components posted gains last month.

The subindex covering expected business conditions dropped 10 points to a -9 reading, and sales expectations dropped 3 points to zero.

The NFIB said that owners complained "poor sales" was their top problem.

Source: Dow Jones Newswires

Jobless Claims Rise to 496,000 February 2010

This has been the second consecutive week where jobless claims has risen. This week the jobless claims has risen to 496,000 from 474,000 week ending in February 20. Jobless claims continues to face challenges compared to the consensus. There has been no reason to believe that job creation will happen in an instant. That's part of the reason for this blog to outline that the economy will take years for it to change its ways for a number of reasons.

Chart Source: BetaInvestment.com

Dark clouds hang over U.S. small businesses

"Small business owners entered 2010 the same way they left 2009 -- depressed," the group said, noting its Small Business Optimism Index reading for January was still below the 90 mark, the dividing line between positive and negative outlooks."

"In January, small businesses had to cut prices despite tangling with inflation while profits remained weak, according to the survey of the federation's 2,114 members."

"There are "still more owners planning to reduce stocks than planning new orders," the group found."

Source: Reuters


Remember that small businesses generate most of the job creation in the United States.

Even as a number of temporary help providers have exceeded estimates, there still continues to be lax growth in sales.

Monster, Inc. announced a large acquisition of Hotjobs which I am not a fan of. They seem to have overpaid for the Hotjobs property even though it is under the price of the prior bidding war with Yahoo.

In the near term there should be underlying risk for these companies as the stimulus and low interest rates start to fade with increased regulations and reform.

Manpower Q4 2009 / Year Earnings

Manpower released their earnings this morning. They beat their 4th quarter earnings with an EPS of .48 vs .24. Revenue also beat with revenues coming it at 4.412 Billion vs. estimates of 4.160 Billion.

Estimates beat and revenue Delcine have narrowed, although still down.

Q1 2010 guidance of -.05 to -.15 vs. estimates of -.06.

After looking at today's news on Manpower it seems to be a mixed bag. I'm fairly favorable to their new acquisition of COMSYS IT Partners, Inc. The acquisition will allow MAN to jump start their sales growth. However this will come at the cost of their already ballooning debt levels. As long as MAN can improve on this cash flow then their debt will be manageable. Any downturn and MAN will continue to face challenges to its debt levels as Moody's had suggested a number of months ago.

In terms of their earnings which may be muted due to flat to slightly positive growth in their European markets. There are lots of risk involved in their European markets, especially if the PIIGS creates currency instablity for Europe. One risk that underlines this issue is a possible bailout by the IMF, or by France (Manpower's largest market) and Germany. If this situation comes to roost then the European economy may face significant hurdles. And cap privatization growth in France and Germany (Europe largest industrialized nations). While US markets continue to face challenges as taxation and reform will continue to put pressure on hiring. Slack demand has lessen any likelihood of a V shaped recovery.

Valuations will be the next topic of concern for Manpower's, even as revenue dropped less than expected year over year.

The Coleman Group Morgan Stanley Burlingame

It is interesting to see how internal departments facilitate operations. While looking at some of the lack of coordination and acumen with fellow employees. I feel an environment that does not communicate, and presents a power struggle is a counteractive environment. Until this group can resolve its internal issues I would not recommend leaving my capital under their supervision.
There is an unbelievable lack of over site from the upper level management which causes friction with lower level employees. There were already enough issues with the firm and its auction preferred shares, and the liquidation process. There is a manta that states, "When in doubt, stay out". And as I've seen that if management continues to live in a bubble, they will continue to lose revenue streams to their competitors.

US Employment Unemployment Woes

Challenging times remain within the United States employment markets. For the last few months I've harped on the fact that growth within the job market has been relatively weak, especially when one takes into account the supply of new graduates and those that continued to be fired or let go due to the weak economy.

So I've looked through a number of charts from the US St. Louis government site that tells the tale of some of the problematic and in my opinion structural woes that faces the United States.

Robert Half Q4 2009 Earnings

As expected Robert Half (RHI) continues its commitment towards expense management.

Robert Half beat estimates by .04 and revenue of $737.4 million vs. $703.6 million.

However revenue is still down 25+% year over year. It sees Q1 2010 earnings at .03 - .08 vs. .06. While it sees revenue at 725 mil - 775 mil vs. 715.6 mil.

Overall Robert Half continues to manage its expenses far better than its much larger competitors such as Manpower (MAN) which continues to hemorrhage in debt. I will be interested in when Robert Half will be looking to expand its operations.

One point to note is that Robert Half's margins look a bit muted. This continues to be an area to focus on. If the economy continues to expand, Robert Half will look fairly attractive due to its favorable cost and debt management.

Earnings 4Q 2009

A number of large US employment and temporary employment agencies report.

Kelly Services (KELYA) Feb 5 2010 4th quarter and full year 2009
Manpower (MAN) Feb 2 2010 4th quarter and full year 2009
Monster Worldwide (MWW) Feb 3 2010 4th quarter and full year 2009
Robert Half International (RHI) Jan 28 2010 4th quarter 2009

It will be an interesting earnings period for these four companies. I'm sure a number of them may surprise to the upside and beat consensus, however growth remains very much muted in the overall US economy. Emerging markets may face hurdles as their recovery starts to overheat and may need to take the foot off of the petal with their stimulus policies.

Slack hiring

After last week's payroll report hiring remains slack.

• Temporary employment has been increasing. However as an investor beware of the red flags in terms of valuations. The valuations traded by these temporary & human resources are out of kilter with their actual growth. A large number of these stocks have continued to see negative growth. Structural changes in employment take many years before they can be corrected.
• Manufacturing employment continues to decline. This hurts companies such as Manpower (MAN) due to their heavy emphasis in the manufacturing sector.
• The average work week remains at 33.2 hours. Hence if there is a remote pick up in the economy, capacity utilization, along with current work staff will grow. Rather then hiring massive number of temps. Although short term temps look attractive due to the lack of benefits paid out to a majority of temps, temps create low morale and weak productivity on a longer term bases.

Because of the weak outlook by companies for revenue growth open positions, especially permanent positions will be weak at best.

Small Business Sentiment Drops Amid Weak Holidays

The sentiment of U.S. small business owners stalled in December, hurt by weak sales and worries about government policies, according to a survey releasd on Tuesday.

The National Federation of Independent Business said its small business optimism index fell for the second straight month, dropping 0.3 point to 88.0 in December.

"Small business owners are not in a hiring mood because customers are not in a spending mood, the group said. Owners continued to liquidate inventories and weak sales trends gave them little reason to order new stocks."

Source: Reuters

Unemployment rate remains at 10% Dec 2009

With the release of today's numbers the recovery in the jobs market continues to be muted.

• Nonfarm payrolls fell by a seasonally adjusted 85,000 in December.
• Number of discouraged workers rose by 287,000 over the year to 929,000.
• Total hours worked in the economy were unchanged in December. The average workweek was unchanged at 33.2 hours, near the record low.
• An alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, rose to 17.3% from 17.2%.

Citigroup upgrades Manpower Staffing and Robert Half Staffing Jan 06 2010

SP500 P/E Ratio

"Citigroup analyst Ashwin Shirvaikar issued a bullish note on the staffing sector early Wednesday, raising ratings on Robert Half International Inc. and Manpower Inc. to buy from hold. He cited "improving signs in the temporary employment sector over the past several months" as well as "optimism on the long-term secular trends in the staffing market" for the moves."

Interesting call by Citigroup Research this morning. I agree that layoffs are steady declining with the latest data. However I am still cautious that valuations have gotten ahead of itself. I'm more concerned with the valuations as pointed out in prior posts of Manpower.

• - Manpower continues to trade at a very rich premium at 1.78 P/B. A price to book near one means value. Clearly the market and speculation from analyst believe that Manpower will return to its glory days such as the Citigroup's analyst boosting its price target to 69. As seen in the price chart MAN is trading above it normalized trading range. MAN has traded well above the growth period during expansion, besides the recent credit induced bubble in 2007. The analyst clearly believes that the economy will produce jobs at such a torrid pace that valuations will be fair. I think we have to remember that permanent jobs provide higher margins. Temporary positions do not provide the valuations that would prop up multiplies of close to 90+x earnings.
  
• - Manpower is trading at a clip of 90+x current p/e, 83x this year's earnings, and 52x next year's earnings. Compared to the SP500 and Nasdaq p/e ratio, Manpower (MAN) is significantly overvalued.
  
• - Revenue continues to be in a significant decline from its high of 2007. While debt levels have continued to rise. For this one reason alone I am a bit more positive on Robert Half (RHI) due to its very minimal debt. Any future shocks in the economy will hurt Manpower's cash flow, and cause another possible downgrade in its credit rating.
  
• - Challenges remain with health reform, higher taxes, quantitative easing of liquidity later this year will continue to crimp hiring by small businesses which produce well over 80% of the jobs in the US.
  
• - Manpower's largest market France has stated that they are looking to reduce their debt levels to the EU standard. The stimulus package that they have provided has provided a slight uptick in their GDP. However challenges remain with the continued contraction in the European markets, especially Eastern Europe.

And last but not least Manpower did warn during their 3Q conference call
that they have warned for their 4Q. Irrational exuberance continues in this
market while actual demand from consumers, and tight and inefficient credit
markets persist.

Manufacturing Up, Jobs Continues To Be Down

Unfortunate as production in the US picks up, jobs continues to be a sore spot for the economy. The following chart via Clusterstock continues to point to questions that I've had for Manpower (MAN) which is heavy in the manufacturing sector.