Recruitment companies are abandoning annual earnings forecasts, squeezed by a softening labor market in which employers are paying for fewer job listings.
ZipRecruiter withdrew its annual guidance citing "atypical hiring patterns" in the first half after cutting 20% of its staff in May. Recruit, the owner of Indeed and Glassdoor, warned it was "not sure yet" when growth would return despite expecting $500 million of annual cost savings after chopping about 2,400 jobs, including about 15% of Indeed's workforce.
"We are expecting decreasing revenue and profit at this moment. And we have uncertainties with regards to the external environment. So we are not announcing full-year guidance," Recruit's Corporate Executive Officer, Junichi Arai, said on its earnings call earlier this month. Tokyo-based Recruit gets more than half of its sales from the U.S. and other markets outside Japan.
The recruiters' struggles offer a front-line look at a softening U.S. labor market that's confounded Wall Street's expectations of a slowdown for months. While demand for employees remains strong, the number of job openings has been dwindling for months. Layoffs in finance, technology and consulting -- usually hot destinations for top graduates and experienced hires -- are piling up.
Equity investors have been hurt by the tumultuous year these companies have endured. ZipRecruiter is up just 2% this year versus the S&P 500 Index's almost 17% gain. Recruit Holdings is up 10% year to date, while staffing companies Robert Half and Manpower are up 3% and down 8%, respectively.
"I'd say broadly, clients were more cautious, more conservative, more tentative than we had counted on," Robert Half Chief Executive Officer M. Keith Waddell said on the company's recent earnings call after its second-quarter profit and third-quarter outlook missed estimates. Forecasts from ASGN and Manpower also missed estimates, weighing on staffing stocks in the U.S. and Europe.
"We are already operating in an environment that is indicative of what we would call a garden variety recession level for now," Manpower's chief executive officer Jonas Prising said on a recent earnings call, adding that while rates stay high, the labor market can be expected to decline further.
Though the U.S. Federal Reserve may pause rate hikes next month, Goldman Sachs economists don't anticipate cuts until the end of next June.
"We're not expecting stabilization if you will in the very short-term. And I'm certainly not a macro A, expert, or B, fortune teller. And so, I'm not sure I have a great answer to when," Robert Half's Waddell added on the call.
Information for this article was contributed by Matthew Boyle and Edward Dufner of Bloomberg News.