Employment Agencies, Business Social Networks, and the Job Market
Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With recent payroll data reporting job growth, employment agencies could benefit. Robert Half International (NYSE: RHI), ManPowerGroup (NYSE: MAN), and Kelly Services (NASDAQ: KELYA) operate traditional employment agency offices and market their placement services to job searchers via the Internet. Economic trends seem like they favor employment agencies. Although social networks which help workers find jobs without signing up with employment agencies, they seem like they're helping, not hurting, these agencies.
Employment agencies can typically benefit early in a recovery because many companies hire temporary workers before bringing on full time staff. Current employment trends may give temp agencies an additional advantage. Many companies reduced their use of full time employees and hired more part time employees and contractors to maintain their flexibility. If full time jobs remain less popular with employers, temp agencies will benefit because workers will visit temp agencies on a regular basis to find new job assignments.
Economic trends do seem like they've helped employment agencies recently. Robert Half, Kelly, and Manpower all reported strong improvements in quarterly earnings. Robert Half recorded a 72 percent increase, and Kelly showed a 65 percent gain for the quarter. ManPower reported a loss of $4.29 per diluted share in the fourth quarter of 2010, and reported earnings of 78 cents per diluted share for 4Q 2011.
LinkedIn (NYSE: LNKD), designed with customized features for business networking, reported 30 percent higher quarterly earnings and seems like it's also benefiting from improvements in the job market. Although this is a significant rise in income for LinkedIn, Kelly and Robert Half reported stronger percentage gains. LinkedIn doesn't seem like it's harming temp agencies, and it may even be helping them. Temporary agency recruiters frequently use LinkedIn to look up potential contract employees who they can recruit to work for their business clients, so LinkedIn's growth may not be a negative sign for traditional staffing agencies.
Facebook wasn't designed for business networking, and many employers don't let their employees use it at work, but some companies have still created business related Facebook apps. BranchOut, one of these apps, competes with LinkedIn by helping Facebook users sort through their Facebook contacts to find business networking opportunities. Like LinkedIn, BranchOut seems like it's more helpful than hurtful for temporary agency recruiters. A potential temporary agency contractor may not have a LinkedIn profile, as LinkedIn is marketed toward professionals and many more people use Facebook, so BranchOut may help temporary agency staff find more potential workers.
LinkedIn, Kelly, and Robert Half can all benefit from rapid economic growth in foreign markets, as they place many of their workers in jobs outside of the United States. ManPower reported that $3.14 billion of its revenue came from the United States in 2011, which only made up 14.3 percent of the company's $22 billion in overall revenue. Kelly reported total revenue of $5.56 billion for 2011, and it uses a segment reporting method that combines financial results from the United States and Latin American nations. Kelly reported $2.48 billion in revenue from its Americas Commercial segment and $889 million from its Americas PT segment. For 2011, Robert Half reported revenue of $2.66 billion from the United States, and $1.12 billion from other countries.
These temp agencies benefit from a short term trend, employers' cautiousness after a recession, and several longer term trends, including the higher use of contractors, stronger international growth, and social networks' utility for recruiters. Kelly, Robert Half, and ManPower seem like they will improve their results significantly in 2012.
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