By Claudia Hirsch

NEW YORK, Nov 23 (MNI) - November brought modest improvement in both temporary and permanent U.S. hiring activity, lifted by seasonal factors and slightly firmer business sentiment, according to staffing professionals.

Recruiters said more positive client discussions in the third quarter are now beginning to bear fruit. While contingent staffing remains employers' path of choice out of this recession, some are beginning to replace a few of the many permanent workers cut in the heat of cost containment. Personnel specialists said that while the worst of the axe-wielding is likely over, employers' inquiries regarding outplacement counseling have recently increased. And they pointed to a number of cost uncertainties, like health insurance and unemployment tax increases, which could puncture a nascent jobs recovery.

Andrea Jennings, president and chief executive of Atlanta-based Lucas Group, an executive and management search firm with 16 U.S. offices, reported a welcome gain in November business, following a 43% revenue slide in the fiscal year that ended in September.

"Our interview activity is way up, our job orders are up and our revenues are up, so I'm feeling pretty good about things," Jennings said, also pointing to uptrends in home sales and the stock market. "In my opinion, this is the beginning of the jobs recovery."

But Jennings said one driver of her accelerated business has been the recruiting industry's dramatic downsizing.

"There is less competition," she said. Room in budgets heading into year end may also have emboldened some employers to take the plunge, she added. "I'm hoping that this isn't another one of those blips that we saw in May."

A Fortune 500 manufacturing client whose hiring activity had disappeared in 2009 began interviewing again in October, and Jennings described that as a "very good sign." Another was a significant deal-side placement in private equity, an area that she said had been "deader than a doornail" for the past 18 months. Also in greater demand now are tax professionals in the $80,000-$125,000 salary range across a variety of employers. Medium-sized New York City law firms have begun looking at prospective associates and junior partners again, but at sharply reduced pay. And Jennings said October and much of the year was active for placements with a firm that provides medical, food and other services to U.S. troops in Afghanistan.

Compensation stopped skidding over the summer, but recruiting-fee negotiating continues, Jennings said.

A staffing professional who oversees 85 offices between Maine and Maryland said fourth quarter contingent-staffing revenues are so far beating her expectations, but permanent hiring remains weak.

"We are above prior year - finally," said Cathy Paige, general manager of Milwaukee-headquartered staffing giant Manpower's Northeast division. "Growing three, four or five per cent in the fourth quarter would be a home run now, and I think that's doable. There are signs here and there that we're past the worst of it."

New York-based Paige said client conversations became less downbeat in the third quarter, and that translated into increased orders and new business by October. Seasonal demand in manufacturing, distribution, retail and call centers accounted for much of this, especially given thinner permanent staffing levels everywhere. Even so, she said this temp-hiring uptrend may well be the harbinger of a permanent-hiring revival beginning midyear 2010.

"Our business always picks up about six months before permanent," she said, and noted that layoffs have slowed considerably. "They're going for temps because nobody has enough confidence yet to hire staff back."

Paige said cautious optimism has replaced fear among many of her clients, but they're still not lengthening their average temp assignments because of cost uncertainties going forward. Many state unemployment tax premia are likely to rise next year to cover shortfalls due to ballooning jobless claims, and employers' cost share of what is likely to become sweeping healthcare reform is still an unknown. These and other factors may conspire to dampen any permanent-jobs turnaround, she said.

One firm that is actively hiring is Challenger, Gray & Christmas, a national outplacement consultancy, but its chief executive said that the heaviest layoffs are probably done.

"We're at the beginning of the change in cycle, but nobody should think that the economy is out of the woods," said John Challenger, whose Chicago-based company has 27 U.S. offices. "We probably have 18 months in front of us where we're not going to see unemployment drop substantially."

He said demand for his firm's services, typically from employers letting go of one or more staffers, surged in tandem with job losses from October 2008 through May 2009.

"It slowed down over the last several months, and now it seems to be picking back up again," Challenger said. Fourth and first quarters are usually busy ones in his business, but the most recent growth appears to be more than seasonal, he said. His firm is looking for outplacement counselors.

A staffing executive with five offices in Northern California, Chicago and Phoenix said his permanent-placement business is off 35% year-to-date vs. 2008, but it has livened up just in the last month.

"We've probably seen more permanent orders coming in over the last three weeks than during any other 30-day cycle we've had this year," said Eugene Lupario, chief executive of Silicon Valley Staffing Group, headquartered in Emeryville, near San Francisco. "There's reason to be optimistic about our permanent division going forward."

Despite the 2009 swoon in permanent hires, Lupario said his overall receipts have rocketed close to 65% higher this year vs. last, thanks in large part to temporary hires by financial services clients. Light industrial staffing has firmed a little, clerical placements are flat and information technology orders are off a few percentage points compared to 2008, he said.

As mergers swallowed up so much of the banking sector, SVS Group found itself on the right side of many deals, enjoying preferred-vendor status with the dominant players. Lupario also said that industry attrition has opened up market share for his firm.

The biggest growth area for banking clients is collections, but insurance, mortgage, auto, credit card, customer service and even high-net-worth private banking divisions are all staffing up on the temp side, he said. Some of these assignments have begun to convert to permanent staff positions.

"The panic is over," Lupario said. "Banks are doing pretty darn well right now."

Average wages are about 5% lower than a year ago but have inched higher in the last three months, he said.

SVS is on track to book a record year for revenue growth. But fee pressure has exceeded wage declines, so Lupario's profit margins are slimmer.

"We're making less per dollar than ever," he said. He is about to open a Los Angeles office early next year and another elsewhere in the U.S. in 2010.

A personnel specialist in Southern California said clients have begun talking about hiring in the new year.

"I don't think anybody's ready to say we're in complete recovery right now, but staffing as a whole has turned the corner," said Karen Dwyer, owner of the Santa Barbara franchise of Oklahoma City-based Express Employment Professionals. She said her business hit a low in February through April, ticked higher in May and has steadied at about that level ever since.

"Flat is the new up," Dwyer said. Lately, technology firms have been adding accounting positions, healthcare employers are looking for medical billing personnel and financial analysts and a variety of smaller businesses are bringing in executive assistants - all on a temporary basis.

"You can only wear out your star performers for so long," she said.

Most of her business is contingent, but in the last couple of months some lengthier temp assignments have been rolling onto permanent payrolls as clients sense that the economy's freefall may be over, Dwyer said.

A community rich with research institutions and tech firms, Santa Barbara also boasts relatively low unemployment, she said. Still, some employers are strapped for capital as lending remains tight.

"Companies that I called a year ago as prospects are now closing up shop," she said. "Some of my clients have had tough times."

The Labor Department is scheduled to release November U.S. employment data on Friday, December 4 at 8.30 a.m. ET. A median forecast in a Market News survey of economists called payrolls to slim by 130,000, after dropping 190,000 in October, and for the unemployment rate to remain steady at 10.2%.

** Market News International New York Bureau, phone 212-669-6430 **