How to Make the Labor Shortage Work for You

Staffing companies like Robert Half International will benefit from the economy’s thirst for workers

Workers are likely to remain in high demand for a while—barring a truly catastrophic Delta variant outbreak this fall.

Few things are ever certain beyond death and taxes. Recently, however, the level of uncertainty tormenting markets has been even higher than usual. Inflation is high, the?Delta variant is rampant?and President Biden’s economic agenda hangs by a thread.

Yet one thing we can say confidently about the economy right now is that companies?really, really need workers. And that seems likely to be true for a while—barring a truly catastrophic Delta outbreak this fall.

Staffing companies such as?Robert Half International,?RHI?0.23%?a California-based firm focusing on temporary and permanent hiring solutions for accounting, administration, information technology and other needs, look well placed to benefit from this trend. After a traumatic 2020, the company posted a record net income of $149 million for the second quarter, up 223% from a year earlier.

It is more richly priced than some competitors at 20 times next 12 months’ expected earnings, according to FactSet, but that may be because its large U.S. exposure and focus on high-demand industries give it a leg up in the current environment. And despite the tailwinds from the general scramble for workers, it is still cheaper than the S&P 500 as a whole, which will cost you 21 times expected earnings.

Robert Half’s core business is in staffing solutions for professional and business services like accounting and office administration—one of the areas?experiencing the worst worker shortages?right now. U.S. job openings in the sector totaled a seasonally adjusted 1.8 million in June, almost 400,000 more than just three months before, according to Bureau of Labor Statistics data. And the job-openings rate (openings as a percentage of filled and unfilled positions) for business services clocked in at 7.9%, the highest of all sectors besides leisure and hospitality, which is experiencing the worst jobs shortage.

Given fast growth and the particular scramble for workers right now in the U.S., the firm may also benefit from its American focus compared with larger competitors like?ManpowerGroup?or?Adecco?ADEN?0.23%?—which rely much more on Europe. Around 80% of Robert Half’s revenue was from the U.S. in both 2019 and 2020, while?Manpower?derives around 10%-15% of revenue from there.

Employers Competing for Workers Turn to Signing Bonuses and Freebies

The company isn’t without risk—mainly of failing to live up to lofty expectations. Robert Half’s stock is already up close to 70% this year. The stock’s average forward price-to-earnings ratio over the past 10 years was 18, implying a bit of froth with the current figure at 20. But employment growth is also a lagging indicator—barring a very substantial turn for the worse in the economy in the next few quarters, it seems likely that employers will still be fighting over workers for quite a while.