The numbers don’t lie. A monster jobs print yesterday showed that in Australia right now, everybody (except Brian Mannix) actually does want to work.

Data from the ABS showed the economy added 88,700 jobs last month, smashing expectations of 30,000.

The extra work was snapped up, too. The unemployment rate dropped sharply to just 5.8 per cent, a solid half a per cent better than forecast.

In Australia at least, the disruption that 2020 brought is slowly fading toward historic consignment.

Or is it?
 

March 2020 – JobKeeper, Covid and toilet roll stocks

On March 12, 2020, the World Health Organisation (WHO) declared that COVID-19 was a pandemic. The news stopped the world dead in its tracks, as governments and stock markets quickly recalibrated their outlooks. The ASX 200 went into deep shock, and by March 20, the index dropped to levels not seen since 2013.

The Australian government meanwhile, took swift action as news of massive layoffs splashed the front pages. By March 30, it had come up with a concrete plan to save the crumbling economy, unveiling the so-called JobKeeper. It was a historic $130 billion rescue package meant to subsidise around 6 million vulnerable workers. The scheme put $1,500 per fortnight into people’s pockets through their employers.

Fast forward one year, we’re now at the point where the scheme is about to be unwound by the end of the month.

During that one-year period, the ASX 200 has risen back by 50 per cent, the RBA had cut rates to a historic low, and the property market is now on the cusp of yet another housing boom. The average Aussie meanwhile, has regained their confidence to spend money, with the latest Australian consumer index hitting a 10-year high.

And suddenly, the unemployment rate is falling.
 

The coming ‘fiscal cliff’

So are we on the verge of falling off the fiscal cliff, a term that has been used to describe job losses as Jobkeeper dries up?

Stockhead spoke exclusively with Lee-Martin Seymour, the CEO of Xref (ASX:XF1), a disruptive HR company focusing on automating the candidate references process for employers. Seymour believes whatever the headline unemployment rate is, it needs to be taken in with a grain of salt, saying the figure is misleading and outdated.

“At what point do you become a statistic? You become one when you’ve exited your role, left it for a little while, and signed on to Centrelink. That whole process could be months later.”

He said a better indicator in gauging future job market is the intent of employers during the hiring process, an approach that Xref has used internally.

“The point at which employers take references, is the earliest stage in the job application process that indicates the company genuinely wants to hire. So our company takes that as a data point, and I would rather measure the intent to hire as a future indicator of the job market rather than some outdated statistic.”

Seymour said that using this approach, he has seen reference requests on Xref jump back up to pre-Covid levels by the seventh week of 2021.
 

Pandemic-proof jobs

Hundreds of thousands of people will no doubt crowd into the job market once JobKeeper is over. But Seymour believes that the reminder of 2021 will be a unique yet confusing job market, where a “confusion bubble” makes the waters murky.

He explains that in a recovery period, the job market is candidate-led, a situation where dozens of candidates apply for every job advertised. These candidates usually fall into one of these categories: someone who was made redundant due to performance issues, one who was let go because of the Covid crunch, and the Covid “survivor” who had remained in their jobs throughout the pandemic.

“The confusion bubble for 2021 includes these three very defined personas. It’s hard for an employer to decipher who’s the best candidate. It’s hard not to discriminate against those who were let go due to Covid, which is unfair.”

But what about the sectors that will emerge victorious from the pandemic?

“Candidates will come back to the job market looking for companies or industries that are more pandemic proof. Think emergency services, aged care, education, and even non-profits serving the community.”

Recruitment companies that have a strong foundation in these industries, like Xref, will also stand to gain, he said. Not only that, verifying candidates will become extremely important in the future as remote working becomes a norm.

“Many recruiters and hiring managers are working remotely, and don’t have the ability to meet with candidates. So to be able to remotely verify who they are, where they’ve been and how good they’ve done those things is absolutely critical.”

Many companies have also adapted themselves and will emerge stronger from the pandemic, ready for any future shocks. For Seymour and Xref,  the biggest lesson in the last twelve months has been exactly that: there will always be a silver lining in any situation.
 

Life after JobKeeper for ASX small cap recruitment stocks

Nobody knows what will happen post-Jobkeeper, but judging by what we’ve seen, the dreaded fiscal cliff so feared by economists doesn’t seem like it will rear its ugly head.

Recruitment stocks are obviously one of the bellwethers of the job market, and once JobKeeper has ended, these small cap stocks are in the frame for a positive recovery story.

Xref (ASX:XF1)

As mentioned, Xref is a fast growing tech-based company focusing on automating the candidate references process for employers. Xref􏰚’s ongoing focus on organisations within the “􏰛trust”􏰚 economy has continued to underpin revenues and support growth􏰒.

As a result of COVID-19, its reliance on outbound􏰙 direct sales activities are fast being replaced by inbound􏰙 marketing-􏰐led demand.􏰒 As a result􏰙 Xref witnessed a rise in inbound leads, reducing staff by 40 per cent while making 56 per cent more sales.

The company’s share price has seen a 45 per cent increase over the past year.
 
GO2 People (ASX:GO2)

Perth based GO2 People (ASX:GO2) provides staffing solutions to a range of industries, and floated on the ASX in 2018 after listing at 20c a share.

The company specialises in key vertical markets including mining, infrastructure, and construction. It recently acquired Hunter Executive Search, bringing in clients from engineering, resources, and water industries.

The combined company has an existing database of 250,000+ jobseekers, and has delivered significant financial improvement over the past 18 months, hitting total revenue of $13.8 million.

Although the share price today of 3.1c is much lower than its IPO price, it has risen by 250 per cent in one year.

Livehire (ASX:LVH)

Livehire is a talent tech and provider of a direct-sourcing platform. Direct sourcing in recruitment refers specifically to contingent workers, and requires an organisation to manage its own direct talent pool.

The company has been building up its North American business, as it sees a potential in the $80 billion market for contingent workers in the US. According to studies by Gartner, 32% of American companies plan to replace full-time employees with contingent employees to achieve cost savings.

The company delivered a 41 per cent higher total revenue for the half ending 31 December 2020, which resulted in a bottom line net loss for the half of $4.7 million.

Its share price has tripled over the past year.

CV Check (ASX:CV1)

Like Xref, CVCheck provides screening and verification services to exmployers globally.

The company has seen a remarkable rise in profits, with net profits rising by 101 per cent to $6.02 million.

The company recently partnered with LiveHire to allow LiveHire clients to streamline its HR processes by having access to CVCheck’s full suite of background checking solutions.

It has also recently acquired Bright People Technologies, a cloud-based workforce credentials and compliance software company which will complement CVCheck’s exisiting business.

The company’s share price has doubled over the last year.

HiTech Group (ASX:HIT)

HiTech is a specialized ICT (information and communication technology) contracting and recruitment company.

Despite COVID-19, the company has continued to produce record revenues. In fact, the first half of 2021 was the 7th consecutive record half year of revenue for the company.

According to the company, by 2027 there will be over one million technology workers in Australia (up 29 per cent from the 700k workers recorded in 2019).

The cybersecurity industry is also on the rise and will be in demand for more qualified workers. The Australian Cyber Security Centre (ACSC) centre, for example, received multiple government funding increases in 2020.

All this represents a significant growth opportunity for the HiTech Group.

The HiTech share price is up by 70 per cent in the past year.

Ashley Services (ASX:ASH)

Ashley is another recruitment company that has delivered strong results in the latter half of 2020.

In addition to recruitment, the company also provides training and labour hire services operating from around 21 offices across Australia.

Its training division performed especially well given the challenging training environment impacted by COVID related restrictions. The division increased it earnings by 70 per cent to $1.4 million for the latest half.

Ashley Services recently acquired The Instruction Company, an important strategic move that gives it exposure to the large and rapidly growing rail industry.

Its share price has risen by 60 per cent in the last 12 months.

 

At Stockhead we tell it like it is. While Xref is a Stockhead advertiser, it did not sponsor this article.