- Recruiter Robert Walters warns on second-quarter profits
- PageGroup and Hays have also shown signs of a slowdown
- Chief executives of all three have changed, or are in the process of changing
“If anyone has a feel for the global jobs market you would expect it to be the recruitment giants, so investors could be forgiven for wondering whether changes in CEO at each of Robert Walters, PageGroup and Hays should have told them something, especially in light of Robert Walters’ profit warning,” says AJ Bell investment director Russ Mould. “It might be unwise, or unfair, to assume recruitment bosses have the gift of second sight – all three have been running stock buybacks to no great avail when it comes to supporting the share price, after all – but perhaps the market could have taken the hint.
“Nick Kirk took over from Steve Ingham at Page on 1 January, Toby Fowlston replaced Robert Walters himself on 27 April and Hays is in the process of looking for a replacement for Alistair Cox as he prepares to step down after fifteen years in charge.
“Their departures, or announcements of their plans, do seem to be coinciding with a marked downturn in their charges’ fortunes.
“Even before the second-quarter trading alert from Robert Walters, all three of the big, quoted recruiters had seen a slowdown in fee income growth.
Source: Company accounts. Based on calendar year (Hays’ year end is September). *First two months only of Q2 2023 for Robert Walters.
“The effects of the pandemic and lockdowns make drawing clear trends from the data difficult, but the recruiters were clearly seeing a slowdown in activity before COVID-19 swept the world. Perhaps the economy is simply slowly returning to that trajectory as the sugar rush of fiscal and monetary stimulus wears off.
|
|
Robert Walters fee growth, constant currency, year-on-year (%) |
|||||||||
|
|
Q1 2021 |
Q2 |
Q3 |
Q4 |
Q1 2022 |
Q2 |
Q3 |
Q4 |
Q1 2023 |
Q2* |
|
Asia |
(3%) |
48% |
54% |
56% |
37% |
20% |
16% |
3% |
(3%) |
|
|
UK |
(12%) |
9% |
17% |
7% |
4% |
13% |
(6%) |
8% |
(9%) |
|
|
Europe |
(15%) |
26% |
22% |
36% |
40% |
37% |
32% |
18% |
10% |
|
|
Other |
(25%) |
20% |
(6%) |
48% |
30% |
43% |
53% |
2% |
8% |
|
|
GROUP |
(11%) |
31% |
32% |
39% |
30% |
25% |
18% |
8% |
0% |
(10%) |
Source: Company accounts. *First two months of Q2 2023.
“Investors and economists will have to wait until Robert Walters’ scheduled second-quarter update on 6 July for the geographic breakdown, so they can assess where the real weakness may lie, though it would be no great shock if the UK is continuing to underperform on a global basis. Fee income fell year-on-year at Page and Hays in the fourth quarter of 2022 and at Page and Robert Walters in the first three months of 2023.
Source: Company accounts. Based on calendar year (Hays’ year end is September).
“Robert Walters still finds some positive points to emphasise. Boss Toby Fowlston stresses the ongoing shortage of candidates and strong wage inflation, but he also admits to longer lead times as companies deliberate over hiring plans, focus on bills after more than a year of galloping inflation and cost increases, or even look to cut staff. Even though unemployment levels are low, and their bargaining power strong, it is also possible that workers feel it may be safer to stay put, rather than make a move and expose themselves to the danger of being ‘last in, first out,’ in the event of any unexpected downturn in trading at their new employer.
“Either way, a profit warning from a recruiter chips away at the last truly robust foundation of the argument that the global economy will avoid a downturn, or at least suffer only the mildest of recessions, namely jobs data.
“The problem here is that employment and unemployment figures reflect decisions taken six to nine months ago, given the time it takes in any recruitment process, from feeling confident enough to hire, to interviewing, selection and then getting the successful candidate to sign on the dotted line.
“Jobs data is by its very nature a lagging indicator and here lies a danger for central bankers, as they look to find the level of interest rates that cools inflation but does not freeze the economy and jobs market. If the global jobs market really is slowing – for whatever reason – and inflation stays sticky, then the awful spectre of stagflation will again be something for currently optimistic stock markets to ponder.
“Meantime, central banks’ declaration that they are ‘data dependent’ is all well and good, but if jobs figures are a key input for them, then there remains the risk they are driving the car while looking in the rear-view mirror. They could be setting policy based on employment decisions taken months ago, when they really need to be trying to find the interest rate that is most appropriate for eighteen to twenty-four months’ time, given the lag in how long it takes higher (or lower) interest rates to really affect the real economy.”
