CWS 3.0: October 19, 2011 - Vol. 3.29

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News: Stock Performance Hints at Recession

The worsening economic outlook continues to exert pressure on stocks of staffing suppliers. Staffing Industry Analysts’ U.S. Staffing Industry Stock Index, an index of 17 staffing companies based in the United States, declined 30 percent in the third quarter after falling 15 percent in the second quarter. The third-quarter decline is not only steep, but broad: All 17 stocks in the index declined in the third quarter — 16 declined by double digits.

Given the cyclicality of the staffing industry, staffing stocks typically decline substantially when the economic outlook worsens, but recover quickly when the economic outlook improves. Investors are suggesting an increased risk of a recession, in which companies temporarily reduce their use of contingent labor, pressuring earnings of staffing suppliers.

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