By Paul R. La Monica
The federal government may not be providing the usual updates about the job market during the shutdown, but employment data from other sources aren't encouraging. That is bad news for big staffing and other labor-related companies.
The outplacement firm Challenger, Gray & Christmas said in a report Thursday that hiring so far this year through last month has slowed to its lowest point in 14 years. Layoffs were the highest for any October since 2003.
Challenger cited increased spending on artificial intelligence and a correction following a postpandemic hiring boom as reasons. But it also said that "softening consumer and corporate spending, and rising costs [drove] belt-tightening and hiring freezes."
Economists for the Indeed Hiring Lab, the research arm for the popular jobs site, said in another report Thursday that job postings are now at their lowest level since 2021 and that wage growth is slowing as well.
That makes it easy to see why shares of companies like Automatic Data Processing, Kelly Services, Manpower, Paychex, Robert Half, and others tied to the labor and staffing industries have been hit hard lately. So have cloud-software stocks with big ties to the labor market, such as Workday and monday.com.
"We've recently noticed how poorly the charts look for stocks related to the US jobs market," said analysts at Bespoke Investment Group in a report Thursday.
ADP's stock is down nearly 15% in the past month, for example, while the stocks of Kelly Services, Manpower, and Robert Half have all plunged about 25%.
Shares of Paycom, a provider of human resources and payroll software, tumbled 12% Thursday after the company reported earnings that missed forecasts following the closing bell Wednesday. According to Dow Jones Market Data, the stock is now on track for its lowest closing level since early October 2024. It has fallen more than 20% this year.
As a result, some of the employment-related stocks may now look attractive. Kelly Services and Manpower seem tantalizingly cheap, respectively trading for just three times and eight times the earnings per share expected for the coming 12 months.
Dividend yields on some of the stocks are sky high. Robert Half's dividend yield is 9%, compared with a touch more than 4% for 10-year U.S. Treasury notes.
But these could be classic value traps, stocks that are cheap for a reason. If the labor market continues to deteriorate, forecasts of earnings for staffing companies and employment-related tech companies are likely to come down. It is the same story for Cintas, a provider of uniforms, and the corporate food-services business $Aramark(ARMK-W)$.
"While we aren't getting regular weekly and monthly payrolls data from the government right now, the action in these stocks seems to be painting a grim picture," the Bespoke analysts wrote.
More rate cuts from the Federal Reserve could possibly give the labor market a lift. But further easing from the central bank isn't a certainty given that inflation remains persistently above where the Fed would like it to be. While odds of a December rate cut are high, at about 70%, that is down from 85% a month ago.
Staffing stocks and other employment-related shares could be in a bind unless there is evidence that the recent weakness in the labor market isn't going to get worse heading into 2026.
Write to Paul R. La Monica at paul.lamonica@barrons.com
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November 06, 2025 13:12 ET (18:12 GMT)
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