Dive Brief:
- Staffing companies will be especially hard hit by economic shifts driven by COVID-19, Moody’s Investor Service said in May 1 commentary on the sector, but the severity of that impact will depend on the type of employers staffing companies serve.
- Moody’s downgraded at least two major staffing companies, ALKU and Tradesmen, due to "these macroeconomic pressures," according to the report. Tradesmen, for example, staffs small and medium-sized businesses in the non-residential construction industry, which has been hard hit by the broad economic slowdown.
- But even those that staff industries that aren’t necessarily struggling face hurdles, including AKLU, which staffs healthcare information tech, life sciences and government positions, are seeing issues stemming from the outbreak. “For staffing companies that had weakly positioned credit metrics before the coronavirus outbreak, even a favorable customer mix may not be enough to spare them from the negative credit implications of a prolonged economic downturn,” Moody’s said.
Dive Insight:
Prior to the pandemic, hiring was booming. That quickly shifted once stay-at-home orders began; an unprecedented 6.6 million workers filed for unemployment the last full week in March, around the time many mass stay-at-home orders took effect.
While some employers have laid off or furloughed workers, particularly in retail, many have first turned to hiring freezes to cut costs. But in a survey released March 30 by Willis Towers Watson, 1 in 5 companies said they had reduced or eliminated hiring of seasonal workers, and another 35% planned to do the same — a large bite into one of staffing companies’ usual revenue sources.
Layoffs may extend for some time; CFOs are increasingly anticipating layoffs, according to a report from PwC, with 16% expecting cuts at the end of March to 26% expecting layoffs by mid-April.
While staffing companies have been hit hard, internal recruiters have also been dealing with unprecedented instability. Gartner research recently outlined a three-pronged approach talent leaders can take as the pandemic continues: embrace virtual interviewing; manage candidate and new hire emotions; and embrace internal mobility
