Temporary staffing firms that normally see an uptick in business during slower economies are finding this slowdown is different.
It’s much more severe.
“This is the first time in the eight years we’ve been in business that we’re seeing everything being put on hold,” said Rondia Moss, who operates her own staffing business, Ethical Personnel Services, from her Alpine home.
Moss said revenues were down 43 percent from the same time last year, and will likely finish the year with half of the $2.5 million in sales it generated in 2007.
Earlier this month, TLC Staffing, a three-office staffing firm based in San Diego, was forced to lay off three workers because of a lack of business, leaving it with 30 employees.
Last year TLC set up a technical and information technology division, which tapped into the area’s still healthy technology industry, and greatly helped improve sales. But by about midyear, the technology sector began slowing, and “now, it’s all come to a screeching halt, and everything is slow,” said Judy Lawton, TLC’s president.
Lawton, who launched the business in 1985, said from talking to others in her industry and from what she knows the prospects for a turnaround aren’t good.
“We were told that we’re probably facing 15 months of tough times,” she said.
While TLC has been averaging about $10 million to $12 million in sales in recent years, this year is way down. Lawton said she hopes to reach $8 million by year end.
Clients in every industry TLC serves, from accounting and finance to information technology, are feeling the slowdown, and some are laying off permanent employees, she said.
Unlike previous recessions, companies are making personnel changes much faster, as conditions deteriorate. “This is happening at lightening speed this time. There’s not a lot of hunkering going on,” she said.
The staffing picture is much the same nationally.
Richard Wahlquist, president of the American Staffing Association, said the housing slowdown that began last year has carried over to nearly every business sector. He cited last week’s employment report from the federal Labor Department which showed 159,000 additional workers filed unemployment claims.
While the national picture for the staffing industry has declined from last year, conditions have not reached the severity of the 2001 recession. In that year’s second quarter, staffing employment dropped 16 percent and continued to fall at double digit rates over the next three quarters, he noted.
In comparison, at the end of the second quarter, revenue for temp firms was off by 6.5 percent from the same quarter last year, Wahlquist said.
Kristy Willis, senior vice president of Adecco’s Southwest region encompassing six states, including California, said the San Diego area is down 8 percent in revenue from where it was a year ago. Things aren’t getting better, she said.
“Normally in about October, we’d see some sizable increase in the number of temporary labor requests, but we’re just not seeing these come in anywhere near where they were,” Willis said.
But a few sectors continue showing resiliency to, particularly high tech and health care, said several business owners.
“Our temporary staffing business is off, but the rest of the business is quite strong. We’re sort of an anomaly,” said Nigel Hook, president of Dataskill, a firm specializing in high tech personnel.
More Project Work
Dataskill is picking up more project work, which involves hiring employee teams to complete specific projects, usually for larger companies. Thanks mainly to the acquisition of a local firm, Silicon Space, Dataskill’s revenues are 32 percent above last year at this time, Hook said.
TalentFuse, a local staffing firm that specializes in providing workers to the technology industry, is also having a better year than in 2007. The seven-year-old firm is benefiting from a trend by tech companies outsourcing projects to contractors. The projects may range in time from six months to four years.
“The contracting business becomes more important in a tougher economy because companies aren’t hiring permanent employees anymore,” said Brian Margarita, founder of the firm.
Margarita said his firm should finish the year between $11 million and $12.5 million in revenue, up from nearly $10 million last year.
Despite the positive outlook, Margarita is seeing signs of distress in the technology sector within the last month.
“In the last month, I’ve seen some clients canceling job orders, and I’ve heard the words ‘budget freeze’ about 20 times in the last few weeks,” he said.
Manpower Staffing, the region’s largest temp firm with an average of 3,600 employees, said its sales through the second quarter were about 16 percent better than the second quarter of last year, thanks to some strategic moves it made last year. While its permanent recruiting and training businesses are down, the firm has been buoyed by significant contracts it has with clients in health care, medical device manufacturing, and high tech, said Phil Blair, executive officer.