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

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

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.

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

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.

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.

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.

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

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

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

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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.

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."

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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."

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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.

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.

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

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

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

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.