Can permanent hiring weakness continue to weigh on staffing stocks?
Investing.com — European staffing companies could face further pressure as weakening demand for permanent recruitment threatens revenue growth, margins, and earnings, according to a report from Morgan Stanley. The investment bank downgraded Adecco Group (SIX: ADEN) to Underweight from Equal-weight and cut its price target to CHF15 from CHF20.50. It also upgraded Randstad (AS: RAND) to Equal-weight from Underweight, while raising Hays (LON: HAYS) to Equal-weight and maintaining its Underweight rating on PageGroup (LON: PAGE). The report said recent improvements in staffing companies’ organic growth have been driven largely by temporary staffing activity, while permanent recruitment remains subdued. A more uncertain macroeconomic and geopolitical backdrop could further weaken hiring demand across key markets. Investors are increasingly focused on gross margin recovery and operating leverage rather than top-line growth. Continued weakness in permanent recruitment could keep pressure on profitability and limit the potential for staffing stocks to re-rate during the upcoming earnings season, the report said. Labor market indicators also remain soft. Job vacancies and online job-posting data across major recruitment markets, including the UK, France, and Germany, continue to point to subdued demand for workers, raising the risk that the recent recovery in staffing activity could lose momentum. Among the major staffing firms, Randstad is preferred over Adecco because of its lower leverage and lower risk of shareholder dilution. The report also highlighted PageGroup as the company with the greatest exposure to permanent recruitment trends, leaving it more vulnerable if hiring conditions deteriorate further. The analysts also flagged artificial intelligence as a longer-term challenge for the sector. Increased use of automation and AI-driven recruitment tools could reduce demand for traditional placement services and weigh on growth prospects across the industry. Related articles Can permanent hiring weakness continue to weigh on staffing stocks? As Claude disrupts stock market, Anthropic researcher warns ‘world is in peril’ Morgan Stanley CIO survey: Why AI hype isn’t boosting 2026 IT budgets Recommended Stories