The Economy Will Dictate Monster’s Performance In 2013

The unemployment rate held steady at 7.8% in the U.S. with 155,000 jobs added in December. The figure is close to the average of 153,000 jobs per month for the year. ^[1] Employment opportunities rose in health care, food services, construction and manufacturing core sectors. The slightly positive monthly employment situation summary, suggests a cautious optimism among employers, and bodes well for the employment services provider like Monster Worldwide (NYSE:MWW).

In December, the Federal Reserve announced its intention to keep the current monetary policies in place until the unemployment rate falls to 2008 levels of 6.5%. ^[2] The move should aid in business expansion across sectors and fuel hiring over the coming quarters. Due to reasons varying from a lack of skills among the unemployed workforce to individuals biding their time for better jobs, enterprises are having trouble filling positions. But there exists a large pool of skilled unemployed workforce, and Monster Worldwide with its large resume database and new cloud-based semantic search services, is capable to bridge the disconnect between vacant positions and willing applicants. ^[3] Monster also faces competition in the social media space from the likes of LinkedIn (NYSE:LNKD) and Facebook (NASDAQ:FB).

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The U.S. added 153,000 jobs on average per month or 1.8 million jobs in 2012. This figure is similar to the one for 2011. For the unemployment rate to drop to 6.5% from the current levels of 7.8% immediately, it would require approximately 2 million jobs, or roughly what has been created annually for the past two years. ^[4] But the difference becomes more imposing if population growth is factored in. CNN Money estimates that 3.2 million jobs need to be added in 2013 for the U.S. unemployment rate to be at ~6.5% in January 2014.

But the Federal Reserve’s decision to stick to the present monetary policies, supports business expansions which could fuel a growth in job opportunities. Finally a decision on the fiscal cliff and debt ceiling, could translate into a spurt in hiring activities in 2013 as the companies that had held back on hiring last year because of these uncertainties, start recruiting. Businesses can now quantify their taxes and costs for 2013, and plan accordingly.

This presents upside for both Monster and its competitors. Monster’s services are popular among recruiters, and its unique new services, 6sense and SeeMore, could see the company beating out competition for new job listings. Usually international economic trends follow trends in the U.S., and an improvement in the latter’s economic situation could spur growth in the Career Services International business. As the competition in foreign markets is not as intense as in the U.S, Monster stock price could see a big upside in 2013.

We currently have a $7.50 Trefis price estimate for Monster, which is 30% above the current market price.

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1. Employment Situation Summary,  Bureau of Labor Statistics, January 2013 [↩]
2. Fed: Low rates until unemployment below 6.5%,CNN Money, December 2012 [↩]
3. A Sea of Job-Seekers, but Some Companies Aren’t Getting Any Bites, The New York Times, June 2012 [↩]
4. How to get to 6.5% unemployment, CNN Money, January 2012 [↩]