The high growth levels experienced by staffing firms throughout Westchester County and the tri-state area in recent years may be coming to an end, which could portend dark times for the national economy, according to a recent survey of staffing industry executives conducted by accounting and consulting firm Citrin Cooperman & Company.
Staffing business owners surveyed throughout the New York metropolitan area forecast slower growth in the near term, as higher costs ”“ especially for insurance ”“ competition from other hiring sources, and a tightening job market join forces to squeeze profit margins. Tri-state staffing firms had reported 20 percent to 25 percent annual average growth over the last three years. These include temp agencies and recruiting firms.
Among these executives, 72 percent expect continued growth, but at a lower rate in 2008, while 21 percent predicted a stagnant or declining market. Â
Ed Roberts, a Citrin Cooperman partner based in the company”™s White Plains office, said the staffing industry often serves as a bellwether for the economy as a whole.
“When the economy is good, companies need people,” he said. “They need more of everything across the board. When times are good companies are bulking up and need to hire people. As the economy starts to slow (temporary workers) are the first people to be let go.”
While most of the firms surveyed said their company was not currently in the midst of a slowdown, they expected that to occur sometime during 2008.
“Over the course of 2008, we would expect our staffing clients”™ growth to slow,” Roberts said. “The economy over the next one to three years could have a fairly strong downturn.”
Given this view of the marketplace, profitability and cash flow were cited as primary concerns among staffing industry executives, according to the survey Despite these concerns, however, 68 percent of staffing firms surveyed do not have a senior-level financial officer and only 37 percent receive a profitability analysis on a regular basis.
“The staffing industry is cautiously optimistic about their growth, but expect it at lower levels then they”™ve experienced in the last three years,” said Nick Florio, Citrin Cooperman”™s partner-in-charge of the firm”™s staffing industry practice.
According to the survey, several factors are contributing to lower profit margins, including competition from other hiring sources, a tightening job market and higher costs for items such as health insurance.
Worker”™s compensation costs were also a concern to those surveyed, said Roberts, “as society becomes more and more litigious.”
Another factor is increased competition from online hiring sources, such as Monster.com.
To compete with Web sites such as those, Roberts said staffing firms need to stress what they offer differently, such as pre-interview screening.
“If you post a job listing on Monster, you could get 300 responses and someone has to look through all those,” he said. “Staffing companies offer their clients a screening process, to make sure they find a candidate that fits the job description, and check the background of candidates.”
Though many believe Westchester and surrounding counties are better equipped to deal with an economic downturn, they may not be recession-proof, Roberts said.
“As the economy restricts it flows out to all areas,” he said. “Westchester has maintained itself very strongly”¦ but time will tell as the economy restricts statewide and countrywide.”
Citrin Cooperman”™s survey polled staffing firm executives from New York, New Jersey and Connecticut in the second half of 2007.
