Friday, May 8, 2009

Extreme job contraction portends sharp rebound

The chart above is an historical look at the change in nonfarm payrolls from the previous quarter. You have to go all the way back to 1975 to see a period of job contraction as severe as the one we are in now.

That's the bad news.

The good news is that the periods that have witnessed such intense job destruction have been followed by sharp and sustained recoveries. From the trough in 1975 to the peak in 1978, job creation surged at a blistering pace, culminating in an extreme, almost giddy, pace of hiring.

It is quite likely that the same thing will happen this time. If you want to profit on this expected trend as an investor, buy the employment services stocks like Monster Worldwide (MWW) and Korn Ferry (KFY).

1 comment:

Unknown said...

New hiring has been strong too, meaning there is mobility in the market, people are losing jobs, but a good portion of them are going on to find new ones.