Dashed hopes

Temporary staffing agencies in Orange County reported a big drop in revenue as demand for workers continued to slide in the past year, according to this week's Business Journal list.

The economic slowdown is hitting temporary workers harder than permanent employees, agency officials said. Unlike the recession of the early 1990s, companies are slashing use of temps before cutting into their core staffs.

"The sense that we're getting from our clients is that everybody is holding back right now on hiring temp workers," said Kim Megonigal, president of No. 7 Irvine-based Kimco Staffing Services Inc. "There's a wait-- and-see attitude among our clients to see what happens with this economy."

The trend has been worsened as an eagerly awaited economic recovery has yet to materialize, agency officials said. They said they now see no real improvement in the economy until late next year.

Another telling detail: three agencies on this year's list declined to give their revenue figures and other information. We've estimated them to be off from a year ago based on the dominant trend among agencies that did report figures.

Revenue for the 20 companies on the list fell 11% to $646.1 million for the 12 months ended June 30-$81 million less than the total posted by those same agencies a year ago. Revenue for this year's group was down 9% from that of the agencies on last year's list.

This year's list includes two newcomers: No. 16 Venturi Staffing Partners of Irvine and No. 17 CDI Professional Services of Santa Ana. Dropping off the list was The Write Connection of Laguna Hills, which didn't qualify based on revenue.

The number of employee placements by the 20 agencies on this year's list fell 6% to 445,593. The agencies reduced their own OC workforces by 12% to 2,349 people.

Temp agencies can be a leading indicator of economic trends, with companies cutting temps first in a downturn and hiring them when things start to ramp up again.

"In a recession, the first people to go are the contingent workers, then the core workers," said Greg Palmer, chief executive of No. 4 Aliso Viejo-based RemedyTemp Inc. "But in this recession companies held on to their core workers a little longer. People have pretty good memories. They remember how tough it was to recruit those really good workers last time."

The list ranks agencies based or operating in OC by their locally generated revenue. Melville, N.Y.-based Adecco Employment Services, a unit of Switzerland's Adecco SA, tops the list again this year.

With 25 OC offices including a county headquarters in Laguna Hills, Adecco posted $116.6 million in revenue, a 9% increase from a year ago.

Orange-based No. 2 Volt Services Group held its rank from last year, despite seeing revenue fall 16% to $72.1 million.

No. 4 RemedyTemp also retained its spot from last year in spite of a 13% drop in revenue to $63 million.

"Business is down mainly because of the economy," RemedyTemp's Palmer said. "We're seeing high-end admin placements and high-tech professional jobs get hit pretty hard. But some pockets like healthcare, construction and mortgage refinancing have held up pretty well."

RemedyTemp's own workforce shrank 10% to 208 people in OC. Palmer said he expects a recovery next year.

"We're optimistic with forecasts of a 3% to 6% increase in revenue," he said. "We expect over the next 12 months the unemployment rate will go down and GDP will go up."

Tustin-based No. 6 Abbott Resource Group Inc. fell three notches from its position on last year's list. The company saw revenue plummet 46% to $44 million. Abbott trimmed its county workforce 45% to 86 people.

Abbott's number of placements fell less dramatically, by 2%, while its average temp wage also fell 2% to $13.10. The hitch: a shorter average duration of temp assignments.

There isn't much link between placements and revenue, since the average length of placements can vary widely among firms based on the terms of their largest contracts and the sectors they serve.

Kimco Staffing Service moved up a notch from last year. The company's revenue fell 9% to $41.6 million.

"We have weak demand from existing clients and not much new business" Kimco's Megonigal said. "Companies this time around are trying to keep permanent staff-they don't need as much temporary help as they've needed in the past."

Megonigal said some of the company's biggest accounts showed a huge falloff in demand for contingent workers.

"Some of our big accounts where we've had a lot of people-like around 300 temps-- are down to 150," he said. "That's a pretty dramatic drop."

Kimco trimmed its OC workforce 29% to 99 employees. The company also saw its number of temp placements fall 21% to 8,093.

Megonigal said that temp firms are more vulnerable to macroeconomic conditions than they were in the 1990s.

"Our industry is so much bigger than it was during the past recession that we now have so much more exposure to economic fluctuations," he said. "Plus, in the '90s, we sold clients on flexible staffing, pointing out that they could easily cut temps during a down-- turn. They've taken us up on that in a much bigger way than ever before."

Megonigal said he expects a general economic recovery to take place during the third or fourth quarter of next year. He and others previously expected a recovery to be under way by now.

"To be honest I thought we'd be coming out of the recession by now-we feel like we've been in the current recession for almost two years," he said. "This economy might not get healthy real soon. But once the economy comes out of this recession, our business will come back just as quick."

At No. 15, the Brea office of Houstonbased COREStaff Services Inc. also saw a big drop in revenue, falling 47% to $12.5 million. That pushed the firm down five notches from last year.

"Unfortunately, things (for the temp sector) aren't going to change until next year," said Edward Ramirez, area sales manager for the firm's Brea office. "Usually for temp placements the third and fourth quarters are up but this year I think things are going to remain as they are."