Adecco warns of labour shortages driving wage inflation

Adecco Group (ADEN.S) warned “pretty unprecedented” labour shortages would continue to push wages higher in the short to medium term, as lower-than-expected third quarter results and guidance for modest growth sent its shares sharply lower.

Inflation is picking up across the world, driven in part by a shortage of workers in some sectors as economies bounce back from the pandemic, creating a dilemma for central bankers who are wary of withdrawing stimulus measures too quickly.

“The mismatch between supply and demand we see in the labour market is pretty unprecedented,” Chief Financial Officer Coram Williams said.

“Labour markets are flexible, they come back, they reorientate, but in the short to medium term you can expect to continue to see a candidate and talent scarcity that is likely to drive wage inflation,” he said.

“Long term that benefits us because we’re part of the solution, but in the short term it means we can also find it difficult to find the candidate.”

Shares in Adecco were 5.8% lower at 0820 GMT.

ZKB analysts pointed to Adecco’s relatively modest organic revenue growth of 9% versus rival Randstad’s (RAND.AS) 21% and Manpower’s (MAN.N) 11% in the third quarter.

Randstad last month warned labour market shortages would be a major theme “for years to come” and ManpowerGroup also mentioned it was seeing a tight labour market.

Williams said the global chip shortage was weighing on Adecco’s business with the automotive industry, particularly in its No.1 market France, and noted talent scarcity in hotel, catering, and tourism sectors, which employees have left to find work elsewhere.

“We have seen a modest sequential improvement in the weekly figures in October,” Williams said, adding this was underpinning confidence for modest revenue growth in the fourth quarter.

Third-quarter revenues adjusted for currency movements, trading days and divestments rose 9% to 5.22 billion euros ($6.06 billion), slightly shy of analyst forecasts for 5.28 billion euros in a company-gathered poll.

Group operating income rose 75% to 196 million euros, reflecting an absence of one-off COVID-related charges, while net income of 133 million euros also just missed forecasts.

($1 = 0.8618 euros)