City Comment: Benefits of US recovery will take a long time to spread

What are we to make of the recent news in global recruitment markets? Adecco, the world’s largest staffing group, reported a 5% organic decline in global revenues in its third quarter, with Europe down on average by 8% and Italy and Spain off by more.
Thu, 22 Nov 2012 | Kevin Lapwood, head of support services equity research, Seymour Pierce

What are we to make of the recent news in global recruitment markets? Adecco, the world’s largest staffing group, reported a 5% organic decline in global revenues in its third quarter, with Europe down on average by 8% and Italy and Spain off by more. 

North America, in contrast, improved by 3%. As I write, Randstad, the global number three, has warned that its global revenue per working day in October decreased organically by 6%.

In Europe, the gradual slowdown that was experienced in the third quarter continued in October with a 9% decline. Although the Netherlands and Belgium declined at a similar level to that seen in September, the falls in France (-14%) and Germany (-9%) were more pronounced. However, despite the adverse impact of Hurricane Sandy, revenue in North America was at the same level as last year.

It all sounds depressingly familiar, but are the signs of a pick-up in North America grounds for optimism? As a young analyst, I was taught that staffing market recoveries begin in the US, migrate across the Atlantic six months later to come ashore in the Benelux region before spreading throughout Europe. 

So is there a glimmer of hope for the start of next year in Europe? Not according to Adecco. The company warned that with Eurozone unemployment hitting a record high in September, it expects no improvement in Europe’s job markets until late next year. 

So what has changed? Why is an economic recovery in North America no longer seen as the precursor to recovery in Europe? The answer, as ever, is Asia. The realignment of global economies with the manufacturing powerhouses and commodity markets of the East has been mirrored in staffing trends. Whereas, in the past, economic recovery in the US could be relied on to stimulate manufacturing jobs in Europe, now it is India, China and Australia that benefit. 

That said, there is little sign yet of a surge in staffing activity in these regions. Indeed the reverse is true. Hydrogen, the UK company that derives over 40% of its net fee income from its overseas operations, mainly in Asia, warned recently that trading since the summer had been below its expectations in what is traditionally one of its strongest periods. Michael Page [since rebranded as PageGroup] had earlier reported similar weakness in its Asian operations.

We wait with interest to see if the signs of economic life in the US will now migrate across the Pacific, come ashore in China and spread throughout the region. However, recruitment geography has changed and it looks as if it will be a long time before the warm glow of recovery spreads to Europe.

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