How to Profit from ManpowerGroup's Positive Jobs Report

The job outlook at American employers is the most promising that it has been since 2008 but uncertainty is also on the rise, according to the Manpower Employment Outlook survey for the the 1st quarter of 2012. The Milwaukee, Wisconsin based temporary staffing firm released its quarterly employment outlook report on Tuesday and said that when seasonal adjustments were factored into its survey results that the net employment outlook for the first quarter of 2012 climbed to +9%, up from the previous quarter's employment outlook of +7%. ManpowerGroup MAN surveyed 18,000 employers to find out about their plans for hiring in the upcoming quarter. The survey found that 70% of employers expected employee numbers to remain the same during the next quarter, 14% of employers plan to increase staff levels and only 9% of those surveyed planned staffing reductions. ManpowerGroup's net employment outlook improved from +5% to +9% when seasonal adjustments were taken into account. Another bright spot in the report from ManpowerGroup is that the company has now seen nine consecutive quarters of positive hiring outlook, after it reported three negative quarters during 2009. The report also marked the first time since the first quarter of 2011 that ManpowerGroup observed a quarter-over-quarter rise in employers' hiring plans. ManpowerGroup also said that uncertainty was on the rise because the amount of employers who were unsure of their hiring plans for the next quarter surged to 7%, up from the previous quarter's 3%. The dramatic rise was the biggest quarterly jump that ManpowerGroup has reported since 1977. It also represented the biggest percentage of uncertain employers that ManpowerGroup has reported since 2005. ManpowerGroup's President of the Americas Jonas Prising said that "slow, but steady momentum has improved employer confidence, which is likely why more employers are planning to hire in the first quarter." Mr. Prising went on to caution that “this uptick is encouraging, but the historically high proportion of employers that are unsure of their hiring plans indicates continued uncertainty about the future and ongoing caution when it comes to staffing plans.” The takeaway from the Manpower Employment Outlook survey is generally positive because if employers overall plans to increase hiring reduces unemployment, consumers should start spending more, which could lead to more job growth as companies increase hiring further to meet increased demand. However, it should be noted that while overall employment should move higher, the overwhelming majority of employers have no plans to increase their staff levels. What might be more interesting to investors is that the planned hiring increases are much higher in some industries than in others. The two sectors with the most optimistic hiring plans were Mining, which had an employment outlook of +16%, and Leisure & Hospitality, which had an employment outlook of +14%. On the other hand, Construction was the only sector whose employers reported plans to reduce staffing levels, with an employment outlook of -7%. There are a number of ways for investors to trade on the information contained in the Manpower Employment Outlook survey for the the 1st quarter of 2012. ACTION ITEMS:

Bullish:
Traders who believe that the optimistic outlook for the Mining and the Leisure & Hospitality sectors is a positive sign for those industries might want to consider the following trades:

• The SPDR S&P Metals & Mining ETF XME, the Market Vectors Gold Miners ETF GDX and the Powershares Dynamic Leisure & Entertainment Portfolio Fund PEJ are three ETFs that could climb higher if the expected staffing increases lead to sales growth in either of these two sectors.

Bearish:
Traders who believe that the Construction sector's plan to cut jobs in the next quarter is a bad sign may consider some alternate positions:

• You might want to stay away from ETFs like the SPDR S&P Homebuilders ETF XHB and the iShares Dow Jones U.S. Home Construction Index Fund ITB and instead short stocks like D.R. Horton DHI, Shaw Group SHAW and Fluor Corporation FLR. If ManpowerGroup's report that the hiring outlook for the Construction sector is looking grim is a sign that construction stock prices could move lower in the next quarter, shorting these stocks could prove to be profitable.

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