Slowdown shrinks job market by 20 per cent, but reforms hold hope

Green shoots of recovery may be sprouting in some sectors of the Indian Economy such as capital goods, but the job market continues to be in the grip of a drought.

Leading recruitment and staffing consultants such as TeamLease, Kelly Services, Adecco and Randstad have seen a sharp slide in hiring compared with earlier quarters, which could mean a bleak year-end for those looking for a job as well as for placement agencies.

“This is the worst we have seen since April last year and permanent recruitment is at least 15-20% lower than the same period last year,” said Sangeeta Lala, VP and co-founder of TeamLease. “Clients have not declared a hiring freeze, but are very selective in their hiring. This makes it more difficult as we cannot have any costs invested in our business and do not know when a demand comes in or stops,” she added.

A combination of factors has led to poor hiring.

Macroeconomics Important

Most large MNCs tend to go slow on hiring in the fourth quarter. But macroeconomics is more important, officials at staffing firms say. The Indian economy grew 5.5% during the quarter ended June 30, 2012, close to a nine-year low, while developed economies are yet to fully recover from the recession of 2008-09. Further, the recent burst of reforms implemented in mid-September is yet to show in new hirings.

“We are witnessing a 20-month low in hiring, but these trends are cyclical and we expect demand to bounce back,” said Sudhakar Balakrishnan, MD of Adecco India.

According to a January 2012 report from Ernst and Young, in FY11, around 360,000 candidates were placed by placement agencies across various levels. The permanent recruitment market is estimated to be 3,000 crore, according to the report on the Indian HR solutions industry.

“The market is quite slow, and 2012 has been a tough year for professionals and companies, as hiring has been negligible,” says Sunil Goel, director, GlobalHunt.

Among sectors, BFSI and IT have been severely affected while retail has also grown slowly, he says.

Adds Asim Handa, CEO of Gi Group: “The job market is certainly slow compared with last year. This could be attributed to slow growth in virtually all sectors barring life sciences, uncertain economic climate in the West, and political uncertainty.”

Although Randstad India has done marginally better compared with last year, on a quarter-to-quarter basis there has been a 5-10% dip in its numbers as well, says GM in charge of staffing Aditya Narayan Mishra.

For Kelly Services, a shift to permanent hiring, which is more lucrative than the temporary market, has not had the desired impact because of the global slowdown.

The margin for each temporary placement is 9-12% compared with 20-22% on each permanent placement. In June last year, the hiring firm had decided to shift out of the low-margin temporary business and concentrate on those sectors that would get them more permanent numbers and higher margins.

“We did not manage to get the lift that we were expecting after changing our business plans,” said Kamal Karnath, Managinf D of Kelly Services India. Although the staffing firm’s business increased 15% compared with the same period last year, it was way short of a 30% expected increase since half their business has become permanent hiring now.

Source: The Economic Times

 

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