Staffing firms look beyond the pandemic

A YEAR AGO employers were furloughing staff. Now many of them are desperately looking for more. The rapid bounce-back in some bits of the labour market—notwithstanding the risk of a new pandemic flare-up—has been good news for workers angling for a pay rise. It is also a boon for staffing agencies, which match firms with potential hires. Beyond short-term dislocations to the workforce, the changing way in which people want to work should keep the recruiters busy.

Firms globally spend over $400bn on human-resources services, according to Royal Bank of Canada. Much of the limelight is hogged by headhunters that poach chief executives, star bankers or legal eagles. In fact the bulk of the business consists of placing low-level office hands and blue-collar workers, often on temporary contracts. The industry is heavily fragmented, but a few global players have emerged, such as Adecco in Switzerland, Manpower in America and Randstad in the Netherlands.

Covid-19 dented revenues at staffing agencies as employers slowed hiring amid the recession and employees hesitated to jump ship. Now a post-pandemic churn is gaining steam. Vacancies are up in much of the rich world, as companies seek staff while workers still anxious about infection remain on the sidelines. The result is a bump in wages, which can be bigger for those ready to defect to a new employer.

The fortunes of recruiters—and their share prices—closely track economic-confidence indicators. But the resurgence has been especially rapid this time. After the financial crisis of 2007-09 it took Adecco and Randstad 7-8 years for revenues to return to previous highs, says Kean Marden of Jefferies, an investment bank. This time they needed just 6-9 months. The two firms’ combined market value, at $25bn, now exceeds its pre-pandemic level.

So far the upturn is mainly from activities that bounce back first as economies recover. Demand for manual labour is usually stronger early on than for office-based jobs, helped this time by abundant work in logistics and e-commerce. And employers are initially more sanguine about taking on temporary staff, who cost more but whose numbers can be trimmed should the recovery stall. The agencies also hope to seize durably on working-life changes induced by covid-19. Some habitual cubicle-dwellers enjoyed working remotely and may prefer employers that allow them to continue toiling from their sofas. Companies can now consider far-flung candidates for jobs that would once have been tied to a city. Recruiting firms, which maintain vast databases of potential staff, can help widen their horizons.

The post-pandemic world may give a fresh lease of life to a business model that was in the midst of being roiled by online offerings. Some platforms have been taken over by the hiring majors: Monster now belongs to Randstad, for example, and Hired, a tech specialist, to Adecco. Staffing groups say human recruiters still have an edge, for example guiding people looking to change fields altogether into new careers.

Economists disagree over whether the recent bout of wage inflation is a short-term blip or a lasting feature of the labour market. Unemployment remains high in some countries. Either way, lots of people think differently about pay cheques, and their relationship to work, than they did a year ago. That should keep those whose job it is to find other people jobs busy. ■

This article appeared in the Business section of the print edition under the headline “Work in progress”