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Employment Agencies Report Stabilization after Killer 2008

The county’s employment agencies saw a steep drop in revenue last year but are hoping the stabilization of the past few weeks marks a turning point for the battered industry.

The 20 largest employment agencies with offices here posted an 8% decline to $797 million in revenue last year, according to this week’s Business Journal list.

The downturn likely was steeper than our list indicates, as there are several Business Journal estimates for companies that declined to provide figures. As a rule, we estimate in line with industry statistics but err on the conservative side.

A year earlier, the employment agencies saw a 5% revenue decline as today’s devastated job market started to root.

But agency officials say they’re seeing signs that give hope the industry’s downturn is bottoming out.

“We’ve experienced revenue stability over the last five weeks,” said Karen Tarca, region director of No. 6 Milwaukee-based Manpower Inc., which has an Irvine office. “It has been the longest string of revenue stability that we have seen in four quarters.”

At No. 7 Irvine-based Kimco Staffing Service Inc., “We’ve gone five weeks without dropping,” Chief Executive Kim Megonigal said. “We’ve also seen a slight uptick in order activity, even if the length of the jobs are shorter. We may have finally hit the bottom.”

The change is a welcome relief for an industry that’s seen consolidation and price wars amid the downturn.

“Clients are looking for lower prices, and it’s become a pricing game with the staffing agencies,” said John Porrello, chief executive of No. 10 Priority Staffing Services.

“Everyone is fighting over what little business is still there,” Megonigal said.

It’s a matter of too much supply and little demand. For the past year or so, employment agencies have seen a big boost in the number of job seekers coming to them while the number of jobs has shrunk.

“We have a lot of people and no jobs to put them on,” Megonigal said.


Year of Pain

The Business Journal’s list reflects the pain that played out in the past year or so.

An anecdotal indicator: Thirteen of the agencies on the list declined to provide revenue numbers to the Business Journal this year.

The list ranks the largest employment agencies by revenue generated from local offices. The agencies provide administrative, technical, industrial and other workers on a temporary and a permanent basis.

Expanding companies often turn to agencies to fill gaps during surges in demand. As things slow down, companies first cut back on workers from agencies.

For now, employers continue to shed workers. For the 12 months through March, the county lost 71,900 jobs, a 4.8% decline.

The agencies themselves saw their own local workers decline 11% in the past year to 894 people, including several estimates.

Kimco Staffing recently closed four offices to cut costs.

The agency reported a 26% decline in local revenue to $43.4 million last year. The company cut 36% of its staff to 63 local workers.

“I had to cut deeper into my organization than I ever had before,” Megonigal said.

Kimco’s figures likely are the best reflection of the industry on the list, which is one of the more difficult to produce because of distrust of rivals by those in the industry.

Each year, executives from some employment agencies on our list accuse others of inflating or downplaying numbers.

Including estimates, declines were widespread on the list, including at the big national agencies, regional players and local ones. Among the few to show increases are those that specialize in technical workers or are doing something a little different.

No. 2 New York-based Volt Services Group with offices in Orange saw a 7% drop to $67.7 million in local revenue.

Top rankings aren’t entirely clear since No. 1 Adecco Employment Services Inc. in Irvine, No. 3 SelectRemedy in Anaheim and No. 4 Kelly Services Inc. in Orange declined to disclose their figures.

These companies were conservatively estimated to be down 10% or more, but they could have seen steeper declines.


Bright Spots

Some agencies have managed to buck the trend.

Newcomer No. 11 Santa Ana-based Alar Staffing Corp. is one of the gainers.

It grew revenue 11% to $30 million in 2008.

Alar Staffing specializes in light industrial staffing, primarily with manufacturing and distribution companies, which for most employment agencies have felt the brunt of the economy.

“We focus on what we do really well and devote 100% of our resources to doing that one thing,” President Pati Cinkle said.

Another gainer was No. 8 Irvine-based Principal Technical Services Inc., which specializes in staffing engineering companies. The agency grew revenue 9% to $41 million last year and saw the addition of one local worker.

Principal has seen the demand for skilled, technical workers who are needed to work on energy projects and oil refineries.

Some segments have remained healthier than others.

Priority Staffing Services, which saw a 6% decline in revenue to $36.5 million last year, has seen a recent pickup in its accounting and financing, especially in the specialty markets of loan modification.

No. 5 Santa Ana-based Aerotek Inc., part of Maryland-based Allegis Group Inc., and Manpower say their healthcare and scientific services divisions are staying strong.

Aerotek saw an 11% decline in revenue to $50.6 million last year and added three people to its 75 local workers.

A year ago, the company acquired Florida’s Kforce Inc.’s scientific division that staffs laboratory technicians, chemists and others.

Manpower saw a 7% decline in revenue to $45.8 million last year. The company staffs all types of temporary workers but has seen stability in medical device manufacturing and healthcare, it said.

The company has also seen growth in its Right Management division, a countercyclical service company that helps laid-off workers transition into new jobs.

“Outplacement is up 280% over last year,” Tarca said.

Consolidation seems to be the pattern for many agencies.

“There is going to be some consolidation for sure,” Kimco’s Megonigal said. “The next six months you’re going to see a number of agencies folding or shrinking dramatically,even some well-known companies.”

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