UPDATE 3-USG's profit down, sees 2 years of economic weakness

(Adds analyst's comment, share price)

By Foo Yun Chee

AMSTERDAM, July 24 (Reuters) - Dutch staffing firm USG People NV (USGP.AS: Quote, Profile, Research, Stock Buzz) reported an 18 percent drop in its second-quarter net profit on Thursday as companies cut back on hiring, and said it sees weak economic growth in Europe for the next two years.

USG People, among the top six jobs companies in the world, said its net profit for the quarter fell to 32 million euros ($50.35 million). Forecasts given by six analysts polled by Reuters had ranged between 30 million and 51 million euros.

"Looking at where we are in the cycle, I don't expect a strong economic recovery (next year or 2010)," USG's chief executive, Ron Icke, told Reuters in an interview.

"I think it will take a long time, maybe two, two and a half years, before the markets will recover again," he said. USG People makes two thirds of its sales in the Benelux region but is keen to expand into other markets such as Germany.

The staffing sector is closely linked to economic developments, with companies more likely to cut back on hiring in a downturn. After robust growth in recent years jobs companies are seeing slower demand amid an uncertain economic outlook.

USG's shares were down 11.9 percent at 10.30 euros by 0831 GMT, the biggest decliner in Amsterdam after earlier hitting a week low of 10.24 euros. Shares in its biggest rival, Adecco (ADEN.VX: Quote, Profile, Research, Stock Buzz), were 1.8 percent lower at 48.44 Swiss francs while second-ranked Randstad (RAND.AS: Quote, Profile, Research, Stock Buzz) was 3 percent off at 19.14 euros.

"We expect the negative sales trend to continue and further intensify," Petercam analyst Paul Linssen wrote in a note. He cut his rating on the stock to 'reduce' from 'hold, keeping its 13-euro price target.