Growth continued in the past year for local staffing agencies amid a tight job market.
Employment agencies saw Orange County revenue rise 4% to $879 million for the 12 months ended June 30, according to this week’s Business Journal list. The ranking tracks revenue generated by OC operations only.
The past year’s gain is short of the 12% growth clip posted by the companies on the 2004 list. But it’s seen as a solid gain coming on the heels of a break-out year for employment agencies following the recession.
And at least a few companies said they would have had bigger growth rates in the past year if they hadn’t decided to cut some unprofitable clients because of high workers’ compensation insurance costs.
Eleven staffing agencies reported a gain in revenue this year, with two companies saying revenue declined. Last year 10 reported an increase with six saying revenue declined.
Numbers for five companies on this year’s list are Business Journal estimates. Excluding estimates, the growth rate also was 4%.
Employment agency growth is seen as an indicator of the strength of the local hiring picture. Companies that are expanding often turn to temp agencies to fill gaps.
OC’s unemployment rate fell to 3.9% in July from 4.6% a year ago. Nationally, the unemployment rate is 5.2% while statewide it’s 5.4%.
“I would say there is a growing confidence,” said James Bowmer, senior regional vice president for Melville, N.Y.-based Adecco Employment Services for the northern part of OC. “Based on the fact people are looking to hire strategically, I have to believe the recession is over, and they need to build their talent pool for the upswing.”
The top companies on the list posted modest revenue results in the past year.
Adecco came in at No. 1 again this year with OC revenue of $120 million, down 2% from a year earlier.
The firm had to drop a few clients because their workers’ compensation rates had become too high, Bowmer said. Without those losses, Adecco could have reported double-digit growth rates, he said.
That growth is coming not just in temporary to hire contracts,but from permanent hire agreements, a key sign to a rebound in the hiring market, Bowmer said. That part of his business had risen 40% in the past year, he said.
Bowmer also said that temporary workers are becoming permanent workers in just three or four months compared to the 12 months or so it took a couple of years ago.
The growth is putting some pressure on wages. Pay has risen 5% to 10% in the past year depending on the position, he said.
Many industries are expanding, including medical device makers, call center operators and financial services companies, Bowmer said. There is some softness in the electronics manufacturing sector, he said.
Adecco’s South County operations continue to gain, said Sy Hasan, an area director covering the region.
Strong demand from healthcare, biotechnology and accounting have led the way. Accounting workers in particular have been in high demand with the 2002 Sarbanes-Oxley accounting reform spurring growth.
With the growing push for hiring, employers are getting less picky.
“Employers are now open to people who have the attitude and the willingness to learn,” Hasan said.
No. 2 Fort Lauderdale, Fla.-based Spherion Corp.’s OC revenue rose 1% to $107 million in the past year.
Some companies still are recovering from the recession hangover, but optimism has grown in the past six months, said Joan van Donge, vice president of Spherion for the Los Angeles area.
“We lost a few clients, we gained a few clients,” she said. “I think there’s confidence in the market, but caution.”
Spherion has seen strength in the financial services sector, but relative flatness in the manufacturing industry, she said.
No. 6 Aliso Viejo-based RemedyTemp Inc. reported a 4% rise in revenue to $63 million in the period.
While RemedyTemp has seen some softness in light industrial accounts, “We’re relatively optimistic,” said Greg Palmer, chief executive of the company.
“We see continued strength in the GDP,” he said. “That’s really a function of the job creation.”
He said the rebound is going through its normal cycles.
Initially, hiring ramps up in the warehouses and distribution centers to handle new orders,a trend that emerged in 2003, Palmer said. This year, businesses are gaining enough confidence to boost office support and pay for new technology.
Also, companies can’t get much more out of productivity gains.
“Many companies have squeezed so much,” Palmer said. “You can only take it so far.”
No. 7 Irvine-based Kimco Staffing Services Inc. reported the list’s largest revenue decline, down 4% to $54 million. But Kim Megonigal, president of Kimco, said he walked away from three contracts after the clients refused to update their safety compliance measures and cut workers’ compensation costs.
“They didn’t want to spend the money, so we opted out,” Megonigal said.
With direct hiring on the upswing, Kimco is launching a new unit called Kimco Professional Search, Megonigal said.
“It is such an employees’ market that if the employer doesn’t move fast, by the time they’ve made an offer, they’ve already taken a job somewhere else,” he said.
One of the bigger gainers on the list was No. 11 Hanover, Md.-based Aerotek Inc., which saw OC revenue climb 22% to $30 million.
Aerotek boosted its own staff early last year in anticipation of the rebound, said Tony Bartolucci, director of business operations in Santa Ana.
That’s paying off now, though he still senses some trepidation among businesses.
“Companies are a little leery of how long this rebound is going to last,” Bartolucci said.
The biggest percentage gainer was No. 17 New York-based Headway Corporate Resources, which said revenue rose 55% to $17 million.
Headway has gained from fast-growing sectors of the locally economy, such as mortgage lenders and insurance companies, said Lori Singer, assistant vice president at the company’s Newport Beach office.
About 15% of its revenue is tied to manufacturing, Singer said.
