When Cyclical Stocks Signal Economic Turning Points: Robert Half's 26% Rally

Recruitment industry stocks often serve as leading indicators of broader economic health. When Robert Half International (NYSE: RHI) surged significantly in recent trading, market participants took note—and for good reason. The company’s latest earnings revealed a critical shift in momentum, one that exemplifies why many investors closely monitor cyclical stocks as barometers of economic cycles.

Understanding the Cyclical Nature of Recruitment Companies

Staffing and recruitment firms operate at the intersection of labor market dynamics and economic growth. Unlike stable, defensive sectors, cyclical stocks like those in the recruitment industry tend to amplify economic trends. During expansions, companies aggressively hire temporary and permanent talent. During downturns, recruitment spending contracts sharply. This inherent volatility is precisely why Robert Half’s recent performance captured market attention.

The company had endured a challenging period stretching across several years, marked by declining revenues and earnings on a year-over-year basis. However, CEO Keith Waddell’s commentary on the latest earnings call signaled something potentially significant: “We are very pleased to see talent solutions and enterprise revenues return to positive sequential growth on a same-day constant currency basis for the first time in over three years.”

The Inflection Point: Sequential Growth Returns After Years of Decline

For investors tracking cyclical stocks, inflection points matter enormously. These are the moments when deteriorating trends reverse and momentum shifts. Waddell’s statement about sequential growth represents exactly this type of signal—a quarter-over-quarter improvement that breaks a three-year drought of contraction.

Moreover, management noted that positive momentum extended into early 2025, and the company exceeded the midpoint of its guidance on both earnings and revenue fronts. These aren’t enormous beats, but they signal stabilization and the beginning of a potential recovery cycle. For cyclical business models, this type of transition from negative to positive sequential growth often precedes broader economic acceleration.

What This Recovery Means for the Broader Economy

Here’s the deeper significance: when recruitment companies begin showing sequential strength, it typically reflects increased hiring confidence among businesses. This has ripple effects. Companies like UPS, which increasingly depend on small and medium-sized business activity for revenue growth, tend to benefit from the same economic tailwinds that drive recruitment demand.

Historically, when staffing firms turn the corner from contraction to expansion, the signal has proven reliable. Netflix and Nvidia are instructive examples—investors who recognized inflection points in those companies at the right moment saw substantial returns unfold over subsequent years. While neither Netflix (identified as a buy in December 2004) nor Nvidia (flagged in April 2005) were recruitment plays, they demonstrate how recognizing momentum reversals in high-quality cyclical assets can drive significant long-term wealth creation.

Timeline for Recovery and Market Implications

Expectations should remain tempered regarding the speed of turnaround. Management guided for a return to year-over-year revenue and earnings growth by late 2025. That’s still several quarters away, meaning investors will be watching quarterly results closely to confirm whether the momentum observed exiting 2024 persists through the first half of 2025.

If Robert Half’s performance over the next two quarters affirms the recovery trajectory, the stock could potentially appreciate substantially in 2026 and beyond. More importantly, such confirmation would signal genuine economic resilience—a message that would resonate well beyond the staffing industry.

Cyclical stocks reward investors who recognize turning points early, but they demand patience and confirmation. The current setup at Robert Half suggests one is unfolding. Whether it fully materializes depends on the earnings releases to come.

*Note: Data referenced through January 30, 2026. Past performance does not guarantee future results.