The jobs market is booming – here are two ways investors can profit

The UK Jobs market is booming and unemployment is at the lowest level since 1974. Rupert Hargreaves explains how investors can profit.

Businessmen and women using computers
UK unemployment is back to pre-pandemic levels.
(Image credit: © Getty )

The UK unemployment rate fell to 3.8% in the three months to February. That’s back to pre-pandemic levels, and is also the lowest level since 1974.

What’s more, there are still plenty of jobs to go around. The number of job vacancies hit a record 1.29m in March.

The UK isn’t the only country experiencing a tight labour market. There are 11.3m unfilled positions in the US, also a near record.

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These are almost perfect conditions for recruiters like PageGroup (LSE:PAGE). Employers are becoming increasingly desperate for staff, and they’re willing to pay up to fill emerging vacancies. To take just one example, some reports suggest that starting salaries in the legal sector in the City of London have hit more than £150,000 a year.

Profits are booming on rising wages

Recruiters help companies find staff in exchange for a fee, usually 20% of a candidate’s first annual salary, although this can vary on a case by case situation. Generally speaking, the harder a position is to fill, the more a recruiter can charge, which gives these businesses an edge in a tight labour market.

PageGroup, which provides employment services under the Michael Page, Page Personnel and Page Executive brands in Europe, the UK, Asia and the Americas, reported a record trading performance in the first quarter of 2022. Following a 49% jump in gross profit last year, profit rose a further 43% in the first quarter as the number of permanent roles filled increased by 44%.

It seems as if management expects this trend to continue. In the period, PageGroup added 345 “fee earners” (recruiters to you and me) with the bulk being placed in its most promising markets such as India where gross profit jumped 79% in the first quarter.

Alongside PageGroup, Hays (LSE:HAS), SThree (LSE:STEM) and Robert Walters (LSE:RWA) are the biggest listed recruiters in London. Hays is the largest, with around 12,100 employees compared to PageGroup’s 7,500, and it is also rushing to add headcount – it took on an extra 1,100 recruitment consultants in the six months to the end of 2021.

Tight labour markets, namely in Europe, powered Hays’ operating profits higher by 327% in the six months to the end of September. A record jump in demand for contractors and permanent employment placements in Germany drove a 317% increase in income at this division.

A focus on STEM markets and the Asia Pacific region

SThree and Robert Walters are around a third of the size of Hays, but they have their own advantages. SThree claims to be the only global pure-play specialist staffing business focused on roles in science, technology, engineering and mathematics (STEM). Contract workers accounted for 77% of its job placements in the quarter to the end of February.

Temporary workers tend to have lower wages and less job security than contract workers, so income from contract placements is far more desirable for recruiters. The mix at SThree’s main competitors is more like 50/50, giving the company the edge as an investment.

Robert Walters’ single largest regional market is the Asia Pacific region. Net fee income from the region outperformed the group average in the first quarter, rising 37% compared to the average of 30%. Income jumped more than 80% in three key markets, Hong Kong, Indonesia and Taiwan.

Companies with the strongest balance sheets should outperform

All four recruiters are rising to the challenges of the global jobs market. They’re increasing headcounts, investing in systems and opening new offices. But there’s no getting away from the fact that this is a cyclical business. Recruiters are usually the first to feel the pain when companies start to cut back on spending, so liquidity and capital management is paramount.

Of the three, Robert Walters has the strongest balance sheet. At the end of March, the company reported £106m of net cash (around 138p per share) compared to a market capitalisation of £527m. SThree’s balance sheet is weaker, but with a focus on specialist STEM contractors, I think the business can afford it. It had a net cash balance of £41m at the end of February.

Despite being almost three times the size, PageGroup’s cash totalled £122m at the end of March, which looks weak compared to £240m for Hays.

So my favourite shares in the sector are SThree and Robert Walters. Their robust balance sheets will act as an insurance policy if the market turns, while their focus on STEM contractors and the Asia Pacific region gives them an edge.

According to Factset broker estimates, SThree is selling at a forward price-to-earnings (p/e) ratio of 11.5, falling to 10.4 in 2023. Robert Walters is selling at p/e of 12.6, falling to 11.2. Ex-cash, the company is trading at an even more appealing multiple of 8.9 projected 2023 earnings (compared to 9.6 for SThree). The shares support dividend yields of 3.2% and 3% respectively.

Rupert Hargreaves

Rupert was the former Deputy Digital Editor of MoneyWeek. He's an active investor and has always been fascinated by the world of business and investing. 

His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks. 


Rupert has freelanced as a financial journalist for 10 years, writing for several UK and international publications aimed at a range of readers, from the first timer to experienced high net wealth individuals and fund managers. During this time he had developed a deep understanding of the financial markets and the factors that influence them. 

He has written for the Motley Fool, Gurufocus and ValueWalk among others. Rupert has also founded and managed several businesses, including New York-based hedge fund newsletter, Hidden Value Stocks, written over 20 ebooks and appeared as an expert commentator on the BBC World Service. 

He has achieved the CFA UK Certificate in Investment Management, Chartered Institute for Securities & Investment Investment Advice Diploma and Chartered Institute for Securities & Investment Private Client Investment Advice & Management (PCIAM) qualification.