V, U or W-shaped rebound? Temp firms don't see eye to eye

NEW YORK (Reuters) - Staffing industry executives do not see eye to eye on the question of when the U.S. jobs market will stabilize and start to recover, but they are beginning to position themselves for an eventual upturn.

Until recently, companies that provide employment services and temporary workers were focused on bringing costs in line with demand.

Some are now starting to shift their emphasis, amid tentative signs of recovering demand, staffing CEOs said on Friday after the government's jobs report showed fewer job cuts than expected in April.

Roy Krause, who heads Spherion Corp, does not expect to make any further cost cuts in his business, which he said is on track to cut more than $100 million in expenses this year compared with 2008.

"We think we have our costs pretty well balanced," he said. "With any signs of stability, we're going to begin to invest."

Employers looking for flexibility will turn to temporary workers before they commit to full-time jobs, Krause said, so temporary payrolls should turn up, even as overall unemployment continues to rise.

"We are starting to see some stabilization," he said.

Carl Camden, CEO of Kelly Services Inc, agreed, but added a few weeks of stability do not make a trend.

Overtime hours and the length of the work week -- metrics that have barely budged in government data -- need to rise before excess capacity is used up and new hiring is needed.

Camden said it is too soon to know whether the current period will be followed by an upturn, a long plateau with a jobless recovery, or a brief uptick followed by a second dip.

Economists have referred to the three scenarios in shorthand as V-shaped, U-shaped and W-shaped, as a way of illustrating what an employment, or GDP chart, might look like over time.

Camden said a likely outcome is a "slowish" jobs rebound. Kelly Services, which cut costs deeply in 2008, set up scenarios the first quarter of this year that will help it decide when and where to add capacity.

"When demand comes, it comes in a lumpy fashion as opposed to an even fashion, so you have to respond to the lumps rather than waiting for the overall employment numbers to improve," he said. "All of us except Adecco said in the U.S. we were all seeing signs of stabilization on the temp staffing side."

'OVERLY OPTIMISTIC'

Tig Gilliam, CEO of Adecco North America, part of the world's biggest staffing firm, said the rate of decline in temporary payrolls was slowing, but said other staffing companies are "a little overly optimistic" about a turnaround.

Professional payrolls continue to decline and big government hiring ahead of the U.S. census helped stem the declines in the headline employment number in April, while private employers shed more than 600,000 jobs.

A very good scenario would be no job losses by December, he said.

Scot Melland, Chief Executive of Dice Holdings Inc, which runs specialized jobs websites for technology and finance professionals, also said it was too soon to conclude labor markets have stabilized, even as his company's measure of tech jobs posted has held steady at about 50,000 openings. The real- time metric, at www.dice.com, showed about 80,000 openings as recently as September.

"We're really not expecting to see any sort of improvement

in our labor markets for the rest of the year," Melland said. "I suspect things will get better next year."

Meanwhile, analysts who follow the industry are cautious.

The percentage of temporary workers in the workforce, at 1.33 percent, is the lowest since 1993, BMO Capital Markets analyst Jeff Silber points out. When that number bottoms, it signals the end of recession, but "we're not there yet," he added.

STAYING FLEXIBLE

Still, Adecco North America, which cut its own staff to about 5,000 now from about 6,000 at the peak in 2006, is adding positions in areas such as its Lee Hecht Harrison career transition segment and in a business that handles recruitment process outsourcing.

It also opened a center in Rochester, New York, that handles tasks such as candidate screening.

"We're trying to keep as much capacity available as possible because, as this does begin to improve, the name of the game is to be able to grow as soon as the market picks up," Gilliam said.

He added that Adecco saw "a dramatic increase" in clients, including industrial conglomerates, looking for ways to manage contingent labor, such as part-time and contractors workers. Employers are rethinking their jobs strategy before they start hiring workers outright, Gilliam said.

One point of agreement among staffing companies that operate globally: the United States jobs market will recover before Western Europe does.

"The U.S. has been much more aggressive about intervention in the economy," Dice's Melland added.

(Editing by Andre Grenon)