Zacks Analyst Blog Highlights: McDonald's, Abercrombie & Fitch, Kelly Services, Manpower and Starbucks Corporation - Press Releases

For Immediate Release

Chicago, IL – November 8, 2010 – Zacks.com Analyst Blog features: : McDonald's (MCD), Abercrombie & Fitch (ANF), Kelly Services (KELYA), Manpower (MAN) and Starbucks Corporation (SBUX).

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Here are highlights from Friday's Analyst Blog:

Employment Report In Depth

Breakdown by Age Group

Teens, regardless of gender have had a very hard time of it in this recession. Just go to a : McDonald's (MCD) and you will see this for yourself. Normally the blemishes you see on the cashier's face is acne, not wrinkles and age spots, as is the case now.

In October, the teen unemployment rate rose to 27.1% from 26.0% in September but it is down from 27.6% a year ago. The increase, though, was all due to a big rise in the participation rate which rose to 35.2% from 34.2% in August, but below the 36.1% rate of a year ago.

The percentage of teens that actually have a job was just 25.6%, up from 25.3% in September but down from 26.1% a year ago. While for the most part the earnings from teen jobs tend to go towards clothes from Abercrombie & Fitch (ANF) and other teen clothing stores, for many it is a significant part of paying for college.

Also, when teens work, they learn important job skills, such as the importance of actually showing up, and doing so on time. The extremely low levels of teens working is not a good sign for the future.

Blacks, Whites, Hispanics

Not surprisingly, Whites have a lower unemployment rates that do Blacks or Hispanics. But there is a little bit of movement towards more racial equality this month. The rate for Whites was ticked up to 8.8% from 8.7% in both September and August, but down from 9.4% a year ago.

The participation rate though fell to 64.9% from 65.2% and the employment rate for Whites fell to 59.2% from 59.5% in September and 59.4% a year ago. The employment rate for Whites had held steady at 59.5% for four straight months prior to this month.

The unemployment rate for Blacks fell to 15.7% from 16.1% in September, and is now at the same level as a year ago. Here again, the headline unemployment numbers are deceptive due to changes in the participation rate. For the month, the participation rate for Blacks rose to 62.2% from 61.7% in September, and equal to the year-ago level. The employment rate for Blacks rose to 52.4% from 51.7% in September and the 52.0% rate of last year.

For Hispanics, the unemployment rate in September rose to 12.6% from 12.4% in September but down from 13.1% last year. The monthly deterioration is worse than it appears though as the participation rate fell to 67.0% from 67.5% in August, and below the 67.7% last year. The employment rate actually fell to 58.6% from 59.2%. A year ago, the Hispanic employment rate was 58.9%.

Stay in School

The unemployment rate for high school dropouts fell to 15.3% in October from 15.4% in August. It was as low as 13.8% in July and still below the 15.5% year-ago level. The improvement in the job situation for those without even a high school education is for real. The participation rate amongst the drop outs rose to 47.0% from 46.7% in September but is down from the 47.2% level of a year ago.

The percentage of high school drop outs actually employed rose to 39.8% from 39.5% August, but down from 39.9% last year. Those that dropped out of high school have dropped out of the labor force over the last year.

Just finishing high school or getting your GED substantially increases your odds of having a job. The unemployment rate for high school grads (with no college) rose to 10.1% from 10.0% in September but is down substantially from the 11.2% rate a year ago. In all three months, the level was far below that for dropouts.

The participation rate fell to 61.4% from 61.9%. A year ago it was at 61.8%. The employment rate for high school grads also fell on the month to 55.2% from 55.6% in September, but is up from 54.9% a year ago. The deterioration for the High School grad group is thus a bit worse than the raw one tick up would indicate.

Those who went to college but did not finish, or only got an Associates degree, had an unemployment rate of 8.5%, down from 9.1% in September, and 9.0% rate a year ago. The good news for those with associates degrees is actually somewhat illusory since the participation rate fell to 70.2% from 70.4% in September and from 70.9% a year ago. The employment rate though did rise to 64.2% from 64.0% in September but is still below the 64.5% level of a year ago.

For those who stayed in school to get their BA (or higher), the unemployment rate rose to 4.7% from 4.4% in September, and unchanged from a year ago. The monthly deterioration is actually worse than the unemployment rates suggest because the participation rate fell to 76.1% from 76.4% in September and the 77.4% level of a year ago.

The percentage of college grads with jobs fell to 72.6% from 73.1% in September and remains below the 73.7% level of a year ago. For those eagle eyes among you who note that the numbers from the educational subsets don't seem to conform to the overall numbers, it is because the educational subset numbers are only for those 25 years or older.

Where the Jobs Are (and Are Not)

As mentioned at the outset of this post, the layoffs of temporary Census workers is no longer a significant issue, with just 5,000 laid off, and just 1,000 remaining. This is a huge change from recent months. The state and local governments laid off 7,000 non-education workers, and have trimmed their payrolls by 123,000 over the last year.

In looking at the effectiveness of the stimulus program from the Federal government, one should keep in mind the massive anti-stimulus effect of budget cuts and tax increases (mostly budget cuts) at the state and local levels of government.

The private sector added 159,000 jobs, up from an addition of 107,000 jobs in September (revised up from a gain of 64,000), and from the 143,000 jobs it added in August (revised up from a gain of 93,000 jobs). A year ago, the private sector shed 262,000 jobs in October. This is the tenth straight month that the private sector has added jobs, but the pace has not been high enough to keep pace with the growth in the population.

Within the private sector, the goods producing sector added 5,000 jobs. The construction industry gained 5,000 jobs, after losing 4,000 jobs in September (revised from a loss of 21,000). The construction industry has been particularly hard hit in this downturn, accounting for about 25% of all the jobs lost, even though at the start of the recession it accounted for less than 6% of the total jobs in the country. The increase in October is a bit surprising and is most likely tied to public construction, such as roads and school buildings, not to home building or the construction of offices buildings.

Manufacturing lost 7,000 jobs, on top of the 2,000 jobs lost last month, making it the third month in a row of manufacturing job losses after a nice string of increases. These numbers confirm what ADP said on Wednesday, but seem to contradict the ISM manufacturing survey where the employment sub-index has been consistently been pointing to an expansion in factory jobs for many months now.

The service sector added 154,000 jobs in the month, up from an increase of 111,000 in September and 126,000 in August. Private service sector job gains were revised up from 86,000 in September and 83,000 in August. A year ago, the service sector dropped 131,000 jobs. One of the biggest contributors to service sector jobs, as always, was the health care industry which added 34,000 jobs.

The health care industry has not had a single down month in terms of employment in the entire downturn. The health care industry has a far higher proportion of women working in it than does the economy as a whole, and this is a big part of the reason that the unemployment rate for women is so much lower than that for men.

Temporary Workers

Of particular interest is the increase in temporary workers (here we are talking about temps working for firms like Kelly Services (KELYA) and Manpower (MAN), not the Census workers). Those jobs increased by 34,900 in October on top of 23,800 in September and 22,500 in August.

It is not that being a temp is the greatest of highest paying job in the world that makes them of particular interest. It is because they are a good leading indicator of future employment trends.

When during a downturn an employer first sees a pick up in demand, he will not know if it is just a temporary blip, or the start of a real recovery. Thus, he is going to be hesitant to take the time and expense of bringing on new workers who will just have to be laid off it if does turn out to be just a blip.

The first think she is going to do is work the existing workforce harder. This is particularly if hours have been previously cut back due to low demand. The upward trend in the average work week is a very good sign in that regard, in addition to the fact that working more hours means more income, and thus more spending by hourly employees.

The second thing an employer will do when faced with an increase in demand is going to be to call a temp agency. Only when the employer is reasonably sure that the upturn is for real and will last will he figure that it is worth bringing on a full time permanent employee.

However, with the exception of July, temp jobs have been rising every month for over a year, and one would think that we would be starting to see those translating into permanent jobs at a faster rate at this point. That disconnect could be pointing to some sort of structural shift in the employment market, but it is too early to say.

Starbucks Remains Optimistic

Starbucks Corporation (SBUX), one of the leading roaster and retailer of specialty coffee, registered robust results for the fourth quarter and fiscal 2010. Adjusted quarterly earnings of 37 cents a share were a penny below the Zacks Consensus Estimate of 38 cents, but increased 54.2% from 24 cents delivered in the prior-year quarter. On a reported basis, earnings grew a robust 85% to 37 cents a share compared with 20 cents delivered in year-earlier period.

For fiscal 2010, earnings were $1.28 per share, which were below the Zacks Consensus Estimate of $1.43, but again was up 60% compared to the prior year. The coffee retailer forecasts fiscal 2011 adjusted earnings range of $1.41 to $1.47 per share, indicating a 15%-20% annual growth. The current Zacks Consensus Estimate of $1.64 is well ahead of the guidance range.

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