Employment Agencies Slumping Amid Downturn

Orange County Business Journal, Apr 28-May 4, 2008 by Lee, Jessica C

ECONOMY: Companies cut back on temps as first line of defense

The economic slowdown is showing up at Orange County employment agencies in more ways than one.

The main indicator: the 20 largest employment agencies with offices here posted a 5% decline in sales to $888.4 million last year, according to this week's Business Journal list.

A year earlier, the agencies saw an 8% revenue gain.

Many have seen employers cut 'back on their use of workers from agencies as a first step before cutting their employees.

"We've seen a sharp decline in hiring patterns," said Fred Flores, chief executive of No. 11 Diverse Staffing Solutions Inc. of Brea. "There's a significant decline in requests forf people in various industries."

Then there's the anecdotal indicator. Nine of the agencies on the list declined to provide information to the Business Journal this year, including some that provided numbers a year ago.

They're believed to have withheld numbers because of drops in their business. Figures for those companies that didn't provide numbers are Business Journal estimates, based on trends of those that did report figures.

Excluding estimates, the 11 other agencies saw a 4% decline to $446.9 million.

The list ranks the largest employment agencies with operations in the county by OC revenue. The agencies provide administrative, technical, industrial and other workers on a temporary and permanent basis.

The industry is seen as an indicator of the local job market's strength. Expanding companies often turn to agencies to fill gaps. When things slow down, they're quick to cut business with agencies.

The county has been losing jobs on a yearly basis since November. In March, the county had 21,000 fewer jobs than a year earlier with unemployment at 4.6%, up from about 3,5% a year earlier.

The agencies themselves saw their own local workers decline 25% in the past year to 891 people, including several estimates.

Companies are becoming more conservative on spending, Flores of Diverse Staffing said. In particular, demand for entry-level workers has declined in the past year, he said, Companies that are looking to hire temporary workers want highly skilled ones.

"As conservative as we are being in our personal lives, you're seeing businesses being just as much if not even more conservative in managing their services," Flores said.

Diverse Staffing reported a 10% decline to $35 million in revenue last year.

Declines were widespread on the list, including at big national agencies, regional players and local ones. Among the few to show increases are those that specialize in technical workers.

No. 3 New York-based Volt Services Group was the biggest reported decliner on the list, though others that didn't report could have seen similar drops.

Volt saw a 20% drop to $72.9 million in local revenue.

"Our drop is not because we have lost our customer base but that our customers are hiring less than they have in the past," said Tom Daley, senior vice president for Volt Services Group.

The company dropped one slot from the prior year's list in part because of its revenue decline. But top rankings aren't entirely clear since No. I Adecco Employment Services Inc. in Irvine, No. 2 SelectRemedy in Anaheim and No. 4 Kelly Services Inc. in Orange declined to disclose their figures.

Those companies were conservatively estimated to be flat or down 5% but could have seen steeper declines.

Some agencies bucked the trend.

No. 10 Principal Technical Services Inc. of Irvine, which specializes in engineers, was the biggest gainer on the list. It grew revenue 32% to $37.5 million last year. Principal has 11 employees, a 22% rise from a year earlier.

The company's niche is behind the growth, Chief Executive Ron Stein said. Principal has seen demand for skilled, technical employees who are needed to work for engineering firms working on energy projects and oil refineries.

"The infrastructure sector is dependent on the population we live in," Stein said. "As the population continues to grow we're going to see more energy projects to support that growth."

Engineering companies are looking for temporary workers with a lot of experience to design and build everything from pipes to whole refineries, Stein said. Finding enough temporary workers with experience is a challenge, he said.

"It's tough to find talent because there's so much work going on and you have to grab someone at the right time when they're just about to finish a project," Stein said.

Another gainer was No. 9 Priority Staffing Services in Aliso Viejo, which reported an increase based on demand for clerical workers in the legal and accounting industries.

Priority Staffing saw an 11 % jump in revenue to $39 million. The company grew its OC headcount 11% to 59 workers last year.

"Accounting firms and law firms are still generating work in a slow economy," Chief Executive John Porrello said. "They need people to help them with the different issues they're dealing with."

Priority has seen a rise in the demand for paralegals, according to Porrello. He credits this to more lawsuits, which legal experts say tend to surge in a down economy.