January 2009

e1915 R2/09

State of the Industry

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• Global Labor Market Trends– Regional Highlights– Legislative Environment

• U.S. Labor Update– Employment Summary– Labor Supply and Demand– HR Spotlight

• Global Staffing Market– Global Competitive Position– Industry Overview– Staffing Market Outlook/Trends

•Global Economic Situation– Economic Performance Global/

Regional– Projected Economic Growth

Global Economic Situation

Americas – U.S. recession could be the worst since the 1940’s• U.S. recession which began Dec ’07 continues to deepen; economy expected to

contract through Q2’09 before slowly recovering; 2009 GDP forecast at -2.5%• Falling U.S. demand will pull Canada’s economy down -1.5% in 2009; Stronger

U.S. dollar will help stimulate exports by mid-09• Economic growth in Latin American expected to fall sharply as foreign

investment and exports continue to slow; Mexico’s economy hardest hit at -2.3% in ’09

EMEA – Global recession, falling oil prices severely impacting the region• Deep and protracted recession expected across all major markets (U.K,

Germany, France, Italy, Spain and the Netherlands); Modest recovery forecast for 2010

• Central/Eastern European economic growth will nearly stagnate to just 0.5% in 2009 after averaging 5.3% during the past three years

• Plunging oil prices and tighter credit curbing 2009 growth and investment outlook for Russia and the Middle East

APAC – Export-based economy leaves region vulnerable to falling global demand

• Asia-Pacific economy forecast to expand just 1.8% in 2009 (6.1% in ‘07)• Japan’s economy fell into recession Q3’08; Recovery not expected before H2’09• China’s export market declined YOY for the first time in nearly a decade; ‘09

growth outlook falls to 6.3%• India’s service-driven economy will moderate but remain relatively stable

despite global slowdown; 2009 growth rate estimated at 4.9%

Economic Performance Global/Regional

4Sources: IHS Global Insights - Economic Outlook and Country Intelligence Reports (Oct 2008 - Jan 2009); “EU see recession being deep and long-lasting” Associated Press 1/18/09.

“While most of the weakness

has so far been concentrated in advanced

economies, the emerging

markets and developing

economies are now being

dragged down as well.”

World Economic Outlook– Global Insights

(1/26/09)

Ongoing financial market turmoil continues to push the economy deeper into recession. Businesses and consumers are retrenching as falling confidence feeds the cycle of lower spending, tighter credit and fewer jobs.

Projected Economic Growth

5

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

'05 '06 '07 '08 '09 '10

3.54.1 3.9

2.4

-0.5

2.6

Sources: IHS Global Insights - Economic Outlook and Country Intelligence Reports (Oct 2008 - Jan 2009); 2010 GDP growth estimate as of 12/09.

Governments around the world have announced massive stimulus plans, injected billions into troubled financial institutions and slashed lending rates all aimed at restoring confidence and spending. While the impacts of these actions are expected to help the global economy regain footing later in the year, near-term growth projections continue to decline.

“Despite its current weakness, we expect the world economy to stabilize during the

second half of 2009…and shift into a higher gear by mid-2010.”

World Economic Outlook - Global Insights (1/26/09)

World Economic Growth

Real GDP (% Change)

Global Labor Market Trends

Labor Market Trends – Regional Highlights

7Sources: IHS Global Insights - Economic Outlook and Country Intelligence Reports (Oct 2008 - Jan 2009); Bureau of Labor Statistics, 1/09; Statistics Canada (1/09); Economic conditions snapshot, McKinsey Global Survey (12/08)

“The share of executives saying their companies are planning to decrease the size of their workforces in the near term has risen from 35 percent to 44 percent in the past month.” Economic Conditions Snapshot, McKinsey Global Survey (12/08)

Americas Region

United States• Unemployment climbed from 4.9% to the current 16-

year high of 7.2% in the past year• Joblessness reaching nearly every industry sector and

worker category; healthcare continues creating jobs• 3.7% unemployment rate among college educated

workers the highest since tracking began in 1992• Unemployment forecast to reach 9% during 2009

Canada• Loss of 34,000 jobs in December pushes

unemployment rate to 6.6% but remains low by historic standards; 8% forecast by 2010

• Job creation in late 2008 shifting toward part-time, public sector; employment set to decline 0.2% in ’09

• Population growth expected to fall below 1% by 2010

Mexico• Formal employment expected to decline 1.2% in ‘09• US recession coupled with tighter immigration controls

expected to increase unemployment

Brazil• Unemployment reached a record low of 6.8% in Dec

‘08, employers added 734,000 jobs in ’08, up 3.4% YOY

• 2009 labor markets will weaken given the economic outlook and high cost of formal employment

• Favorable demographic profile (6% over age 65 compared with over 12% in the U.S. ), but informal labor market still accounts for 40% of the economic output

With the exception of the U.S., regional labor markets performed well throughout most of 2008, but will weaken as the global recession deepens.

EMEA Region

United Kingdom• Employment fell just 26,000 in the Sept-Nov period, but losses masked by the

surge in part-time employment• Deep and prolonged recession now expected to push unemployment to 8.8% by

2010• Historically pro-immigration policies being debated in response to deteriorating

labor market

France• Unemployment increasing at its fastest pace in 23 years; expected to reach 8.3%

in 2009• Job losses impacting goods and services industries; strength continues in

construction, education and health careGermany

• Number of unemployed workers increased in Dec ‘08 for the first time in almost three years

• Unemployment is expected to grow from 7.8% in ‘08 to 8.9% by ‘10, well below the 11.7% peak seen in ‘05

• Labor markets helped by growing ties with emerging markets

Netherlands• Unemployment edged up during Q4’08, ending the year at just 3.9%; wages grew

at a 5-year high of 3.3% in 2008• Labor market expected to weaken in 2009, but outperform other large EMEA

markets • Government stimulus package includes payroll subsidies to help reduce

employment, sustain spending

Russia• Rapidly declining oil prices have negatively impacted business confidence and

labor markets• Unemployment grew 20% in Q4’08; Cutbacks extend beyond manufacturing into

service-based industries• Despite weaker near-term demand, shrinking/aging population trends will lead to

labor shortages; governments considering incentives to increase birth rates

Labor Market Trends – Regional Highlights

8Sources: IHS Global Insights - Economic Outlook and Country Intelligence Reports (Oct 2008 - Jan 2009); “Crisis rattles Russia’s labor markets”: Associated Press Worldstream (10/30/08);

Tight lending conditions, continued financial market volatility and sharply lower global demand will cause European labor markets to weaken over the coming months.

Labor Market Trends – Regional Highlights

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Sources: IHS Global Insight Country Reports (Oct 2008-Jan 2009); “Employers in China have issues shedding workers”: Workforce Management (12/29/08); “Employment situation worsening in China”: Sunday Business Post (12/14/08); “India Inc hiring temporary employees to cut costs”: The Economic Times India (12/30/08)

APAC RegionJapan

• Recovery from ongoing recession not expected before H2’09; unemployment seen rising into 2010

• Increased labor market flexibility may actually deepen the downturn as employers layoff staff to reduce expenses

• Demographic shifts will cause the labor force to peak within the next few years – falling 33% by 2050

China• 500,000 jobs lost in Q4’08; labor market weakness in export

manufacturing and among college graduates

• 2008 labor laws making staff reductions more difficult, potentially slowing economic recovery

• Estimates suggest the economy must grow at 8% just to absorb the newly added working-age population

India• Hiring trends shifting to high-skilled contract workers as a hedge against

global recession

• Government hesitant to modify restrictive labor laws

• Projected skilled worker shortage of 30 million by 2015; talent gaps across healthcare, finance and retail

Australia• Employment growth slowed to end ‘08, but labor markets remain tight by

historic standards; wages up 4.1% YOY

• Underemployment starting to impact the job market as full-time positions are being replaced by part-time

A simultaneous slowing of demand across the U.S. and Europe is now impacting APAC’s labor markets.

Legislative Environment

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Japan: Government approved a bill to ban

select “day labor” staffing practices and monitor safety conditions for temporary workers

European Union: European Commission providing funds

to EU member states to fight against illegal immigration

Canada: Ontario introduced legislation designed

to give temporary workers more rights

United States: Incoming Obama administration

expected to pursue several pro-worker legislative changes

France:Effective Jan 2010, employers will no

longer be permitted to force employees to retire at age 65

United Kingdom:• Britain’s opt-out to the EU 48 hour

maximum work week being challenged

• Efforts underway to delay a scheduled April ‘09 tax increase on temporary workers in certain industries

China: Legal experts speculate economic

slowdown may prompt government to loosen 2008 labor contract laws

Korea: Seeking to double the length of time

employers can use temporary employees before having to hire them permanently

Malaysia: Banned hiring foreign workers in key

industries w/employers forced to layoff foreign staff ahead of nationals to protect against downturn

In response to deteriorating economic conditions, recent legislative activities are aimed at job preservation. Longer-term legislative actions remain focused on increasing labor market flexibility, attracting top talent and improving workers’ rights.

Sources: “EU Governments to Receive European Commission Funds for Fight Against Illegal Immigration”, German Deputies Back Introduction of Minimum Wage in Several Sectors”, “Malaysian Government Bans Recruitment of Foreign Workers in Key Industries”: IHS Global Insight Country Intelligence (Oct 2008-Jan 2009); “More Labor for HR”: Workforce Management (1/19/09); Ontario announces legislation for temps; Staffing Industry Analysts (12/10/08); “UK’s opt-out from EU work directive is under threat”: The London times (11/6/08); “Ministers slammed for ‘tax on jobs’”: Financial Times (1/19/09); “Employers in China Have Issues Shedding Workers”: Workforce Management (12/29/08); “Job Contract of Temporary Workers to be Extended”: Korea Times (11/14/08); “Gov’t OK”s bill to ban dispatch of temp day workers”: Japan Economic Newswire (11/4/08); Monthly Legislative Update – Africa, the Middle East and Europe: Hewitt Associates (12/08)

Germany:Introduced legislation that would make

6.5 million more workers (temporary and permanent) eligible for minimum wage

U.S. Labor Market

Employment Summary

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Deep Cutbacks Cap Off a Dismal 2008 Job Market• 524,000 jobs lost in December - 12th

consecutive decline• September’s financial market crisis represented

a “tipping point” for labor markets:– 1.9 of the 2.6 million jobs lost since September– At 7.2%, unemployment nearing a 16-year high

and is impacting all industries/skill sets• Underemployment a growing issue with the

number of people working part-time due to economic reasons up 75% during the past year

Job losses for 2008 ended nearly evenly split between the goods and services sectors• As a percentage, however, good-producing

industries shrank 6% vs. just 1% for services

Sustained job creation not likely before the end of 2009

Monthly Change In Non-Farm Employment (000’s)

Source: Bureau of Labor Statistics (1/9/09), Reuters/University of Michigan Survey of Consumers (12/08)

“The appeal of lower prices…has been largely offset by widespread uncertainty among consumers about their future job and income prospects.”

Richard Curtain– Director, Reuters/University of Michigan Surveys of Consumers – (12/08)

Significant price declines helped lift consumer confidence, but pessimism about the future economic outlook remains

• Consumer Sentiment at 60.1 in December, up from 55.3 in November, but well below the 75.5 recorded a year ago

Labor Supply and Demand

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Sharp economic decline during the fourth quarter pushed unemployment over 11 million in December

• Current figures represent almost 3 unemployed workers for every online job listing

Online job listings declined more than 500,000 during the month of December

• Steep reduction (-17% YOY) suggests recovery will remain elusive well into 2009

Online job demand declined across nearly every occupational category

• Healthcare support and Arts/ Entertainment each posted modest YOY gains

Sources: Help Wanted Online Data Series: The Conference Board (1/7/09); Bureau of Labor Statistics (1/9/09)

Labor Supply vs. Labor DemandU.S. Seasonally Adjusted

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

6,000,000

6,500,000

7,000,000

4,500,000

5,500,000

6,500,000

7,500,000

8,500,000

9,500,000

10,500,000

11,500,000

No. of AdsNo. Unemployed

Unemployment LevelTotal Online Help Wanted Ads

The gap between labor supply and demand continues to widen…

HR Spotlight

14Source: “Upgrading Talent” The McKinsey Quarterly (12/08); “Managing Recruiting During an Economic Downturn” ERE.net (10/20/08); “A leg up in down times” Workforce Management (1/19/09)

Re-thinking Talent Management in a Down Economy

While headcount reductions and hiring freezes are often necessary to help manage through economic downturns, companies should also be seizing the opportunity to upgrade and maximize their talent.

Selective recruiting during a down economy offers several advantages:•Less competition for talent as employers reduce recruiting budgets•Increased ability to attract top talent from hard hit industry sectors (financial services, manufacturing, etc.) – including those that survived layoffs but are seeking greater stability•Weakened employment brand for competitors who fail to effectively manage layoff communications

Headcount reductions offer an opportunity to examine and redesign jobs and career paths that:•Are more attractive to both internal and external candidates•Offer top performers new challenges, greater responsibilities and room for advancement•Take full advantage of the talent currently in place

Resist cutting training and development programs. These programs increase productivity and support the development of future leaders.

Implementing a disciplined talent management strategy during down periods can help position your company for success when the economy recovers.

Global Staffing Market

Adecco8.7%

Randstad/ Vedior7.3%

Manpower6.6%

Kelly1.7%

USG People1.6%

Recruit/Staff Service

1.5%Hays1.4%

Robert Half1.4%

Allegis1.3%

Radia1.0%

Other67.5%

* Privately held+ Formerly Goodwill Group

Note: Tempstaff-People Staff merger will create 2nd largest staffing company in Japan with approximately $2.4B USD in revenues (Source: 25th Service Industry Comprehensive Survey, Nikkei MJ, 7 Nov 2007). The merged entity will hold a 0.7% share of the global market. Japanese staffing market appears to be at the start of a consolidation phase. Note: Manpower includes $1.4B of revenue generated by franchise offices not included in MP Inc. consolidated sales.

CompetitorGlobal

Ranking

2007Revenue

($B USD)

2007 Est.

Market Share

Adecco (SZ) 1 $28.9 8.7%

Randstad/Vedior (NL) 2 $24.2 7.3%

Manpower (US) 3 $21.9 6.6%

Kelly (US) 4 $5.7 1.7%

USG People (NL) 5 $5.3 1.6%

Recruit/Staff Service (JP)*

6 $4.9 1.5%

Hays (UK) 7 $4.6 1.4%

Robert Half (US) 8 $4.6 1.4%

Allegis (US)* 9 $4.4 1.3%

Radia+ (JP) 10 $3.5 1.0%

Global Competitive Position (based on 2007 Revenues)

The global competitive landscape was transformed throughout 2008 as a result of several large acquisitions. The top 5 competitors represent just over one-fourth of the market, with Kelly ranked 4th globally. Acquisition activity during 2009 is expected to be more muted and targeted toward niche segments/markets in response to weaker economic conditions and tighter credit availability.

Global Competitive Position

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Americas32%

EMEA44%

APAC24%

2008 Global Market% of Total by Region

Industry Overview

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U.S.27%

Japan17%U.K.

16%

France9%

Germany5%

Netherlands4%

All Other23%

2008 Global Market% of Total by Country

The global staffing market is estimated at $345B, with the top six markets representing nearly 80% of the total. The U.S. is the largest country while EMEA is the largest region. Commercial staffing represents more than 60% of global revenues, but growth is being outpaced by specialty staffing.

Commercial60.7%

Professional/ Technical

28.9%Outsourcing and Consulting

10.4%

Segment Distribution% of 2008 Global Market

Staffing Market Outlook

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Americas• Q1’09 demand to remain weak, but the

number of temporary employees expected to stabilize throughout ‘09

• Strongest sectors include healthcare and outsourcing /outplacement services

EMEA• Sharpest regional declines expected in

developed staffing markets (U.K., France, etc.)

• Growth in 2009 will be limited to select emerging markets

APAC• Japan’s temporary workforce will continue to

decline due to falling exports• In emerging Asia, regional business mix

shifting from permanent to temporary as hiring firms seek flexibility in response to a slowing economy

Sources: IHS Global Insights - Economic Outlook and Country Intelligence Reports (Oct 2008 - Jan 2009); Staffing Indicator Report, BMO Capital Markets (1/5/09); European Staffing Report, Deutsche Bank (12/3/08); Staffing Industry Forecast, 2009 – The dark before the dawn (1/12/09); “Labor Forecast Predicts 21.2% decrease in demand for temporary workers in 2009 first quarter, representing eight consecutive quarter of declines” GlobeNewsrire (1/13/09); “National responses to a global crisis” Recruiter UK (1/21/09); “Japan 85,000 temporary workers to lose jobs due to economic crisis”, Thai Press Report (12/19/08); “India Inc hiring temporary employees to cut costs” The Economic Times India (12/30/08)

“Recruitment is a cyclical business. The global

financial crisis and the resultant reduction in

recruitment has hit agencies around the

world”

Recruiter (UK) – 1/21/09

Staffing industry performance is highly correlated with the general economy. The unexpectedly sharp fourth quarter downturn coupled with forecasts for outright contraction in the global economy during 2009 will weigh on the industry’s near-term outlook. The long-term industry outlook remains strong given the underlying demographic and labor market trends.

“temporary staffing represented an increasing number of total [U.S.] jobs lost, including nearly 25%...in the current recession. We believe this shows the industry’s role as a flexible labor supplier has become more apparent. “

BMO Capital Markets Staffing Indicator Report – 1/5/09

Staffing Market Trends

Trend Business Impact Kelly’s Response

Migration from Staffing Services to HR Solutions Provider

• Talent needs becoming more specialized and global in scope

• Increased need for customized solutions, new products

• Growing use of technology to provide the necessary visibility and management

• Global expansion of professional, technical, outsourcing and consulting services

• Full-range of workforce solutions (full-time, temporary, outsourced, IC) and delivery models

• Global Implementation Services group to design and execute custom client solutions

• Successful partnerships with leading technology solution providers

Current and Projected Skills Shortages

• Increased need to identify/attract passive candidates

• Increased need for “borderless” recruiting methods/solutions

• Increased importance of offering workforce flexibility

• Targeted recruiting programs/channels (Mature/Retiree, Search Marketing, Social Networking, etc.)

• Global mobility/cross-border recruiting capabilities

• KellyConnect solution expanded to support home-based employment

Evolving Legislative Environment

• Liberalization of labor markets• Greater protections for temporary workers

• Investment/expansion into emerging markets (China, UAE, Eastern Europe)

• Industry association involvement

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Staffing firms must respond to changing demographic and legislative conditions, be capable of defining and delivering innovative client solutions and leverage new channels for finding and deploying talent in today’s marketplace.