Reports that unemployment is falling and gross domestic product is rising in the United States is positive news for the $100 billion staffing sector; and publicly traded companies in it such as Paychex (NASDAQ: PAYX), TrueBlue (NYSE: TBC), Labor SMART (OTC: LTNC), and ManpowerGroup (NYSE: MAN).
Firms in the staffing industry are uniquely situated now to gain, and benefit those owning the stock, no matter what happens to the American economy.
Demand Spiked in the Great Recession
That was clearly demonstrated during The Great Recession. Due to its impact on the collective business psyche, many firms pulled back from hiring fulltime workers. As a result, there was a greater demand for the products and services of the staffing industry. From there, the stock prices rose for Paychex and others.
This is especially true for those in the $29 billion demand labor sector of the staffing group. For the last year of market action, TrueBlue has climbed more than 70%. Labor SMART, also operating in the demand labor industry, has posted record revenues for the most recent quarters. So strong is business for Labor SMART that it is expanding its areas of operation in all aspects.
The staffing industry is promising for long term investors in that it should continue to prosper. Businesses are now firmly committed to utilizing the goods and services of these entities, no matter the economic environment. During The Great Recession, companies realized the value of project workers.
Demand Should Rise as the Economy Shifts
There are many reasons for that, not all having to do with the lower costs.
Flexibility is very important for many businesses. Not all are in the blue collar sector, needed more hands and backs to work on the loading dock for a day or two during peak periods. Law firms have a huge demand for attorneys and other legal professionals to work on temporary assignments.
That is demonstrated by almost 40% in the stock price of Robert Half International (NYSE: RHI) over the last year of market action.
There are also strikes that increase the demand for staffing companies.
Labor strife is typically associated with factory workers. For that, temporary workers are easily provided by the industry. Many times nurses go on strike at hospitals. When that happens, business increases for Cross Country Healthcare (NASD: CCRN), which specializes in the medical professions.
Obamacare is Playing a Role as Well
Increasing costs from the Affordable Care Act, or ObamaCare, add to the appeal of project workers from the staffing and outsourcing sector. That is true no matter the industry group. Companies with over 50 employees will have to provide very expensive health insurance to those who work more than 30 hours a week. Due to that requirement, the appeal of workers who are not full-time is obvious.
The proven ability of the staffing industry to prosper under all economic conditions has met with approval by the analyst community.
Now trading around $40.60 a share, the mean analyst target price for Robert Half over the next year is $44.58. That comes after its double digit jump for 2013! TrueBlue is expected to rise to $29.43 a share during the next years, up from trading around $24.60, at present. Labor SMART is expected to soar in price, too, based on a recent research report.
In addition to the bullish outlook from Wall Street, investors should also be pleased by the wide selection of stocks. Paychex, as detailed in a previous article on this site, is as blue chip as any publicly traded company. It also pays an above average dividend yield. For those looking for growth from small cap, Labor SMART continues to report revenues. No matter what the economic climate or the investor preference, the staffing and outsourcing sector has many appealing companies that should be rewarding over the long term.
What are your thoughts on the future of staffing companies as the economy improves?