SI Review: October 2010

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Analyst Take, SI Review October 2010

 Q: The "Pulse" survey has been operating for more than 12 months now. What is it telling you about current staffing industry trends?
A: First, let me just say the pulse is open to anyone and participants receive a complimentary 30-plus page report!

Q: OK. You got that off your chest. Now about the trends...
A: Thanks. I just had to get that out. Regarding trends, we've really seen a tremendous recovery story in staffing. The survey tracks staffing industry performance by segment and sector, and we've seen particularly strong improvement in industrial and IT temporary staffing over the last year. Other areas, such as healthcare staffing, have been slower to improve but even these are starting to pick up.

Q: What areas of staffing are under-performing?
A: The only area that really is holding back is outplacement, and that's probably not going to change. It's a counter-cyclical sector, so as the economy improves, those services just aren't needed as much.

Q: You also track M&A activity in the survey.
A: It's something of a revelation. We knew there was a lot of M&A activity in the industry, but not as much as the survey would seem to indicate. On average, roughly 2% to 3% of firms each month have said they closed an acquisition during the month. Of course, 2009 was a year with a lot of small business fire sales, so we don't know to what degree this level of activity is typical, but think about it -- add up that 2% to 3% over the course of a year and you're talking about a very high level of industry churn. Again, though, 2009 was hardly a normal year for staffing or anyone else, so we'll have to see if this level of activity holds up.

Q: What were acquirers buying during this period?
A: More than half of all acquisitions reported in the pulse survey were in office/clerical, information technology, industrial and per diem. Relative to its size, per diem really stands out as an area with a lot of activity.

Q: What about forward-looking indicators?
A: In other surveys, we ask staffing firms to project growth, but the predictive value isn't as strong as we'd like. However, we developed a question with much more predictive value in the pulse survey, essentially asking staffing firms if they were more inclined to acquire another firm or sell their own. What comes out of that is the industry "Buy/sell" ratio, and we have that now by segment and by industry served.

So far in 2010, there are about 3.5 buyers for every seller, up from a ratio of about 3.0 in the last half of 2009. That increase is a bullish sign for the industry. Of course, this ratio varies markedly by segment, with higher ratios for IT, engineering and industrial, and lower ratios for nursing in particular.

Q: You've also added another forward-looking indicator...
A: Yes, we're very excited about this new one. We've started asking staffing firms: "During the last month, which would you say was more challenging for your staffing firm, sales or recruiting?" The idea of this question is that when business is deteriorating, sales will become more challenging and recruiting less so; and when business is improving the reverse should happen. That indeed is what we are seeing right now.

In January, the sales/recruiting difficulty ratio was 4.3, indicating more than four times as many staffing firms cited sales as their biggest challenge versus those citing recruiting, but that ratio has been steadily declining and is now about two -- that's really a big change in such a short period, and it suggests staffing firms may need to start emphasizing the recruiting side of their business a bit more.

Q: So I gather from your plug at the beginning of this interview that you want more participants in this survey.
A: It's a case of the more the merrier. The more data points we have, the more solid our conclusions will be and the more we can cut the data in ways that would be useful to staffing firms. For instance, to a small degree we are currently able to see trends not just by segment but also by primary industry served. We have a little data of that kind, but with more participation we could potentially tell staffing firms very precisely about customer demand. How valuable would that be? So, yes, I encourage everyone to participate. Did I mention the survey only takes 10 to 15 minutes, it's anonymous and confidential, and that only participants receive the 30-page results?

Q: No, but I knew you would. Thank you.

If you would like to participate in the Staffing Industry Monthly Pulse Survey and thereby receive the complimentary survey report referenced above, contact ncalvi@staffingindustry.com.

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