As indicators of the economy's trajectory (up or down) go, I can't think of many companies more relevant than the nation's employment firms. When companies like Kforce (NASDAQ:KFRC), Spherion (NYSE:SFN), and Kelly (NASDAQ:KELYA) are swimming in black ink, it seems to me that the economy must be humming along nicely. Conversely, if Adecco (NYSE:ADO), Korn/Ferry (NYSE:KFY), and Heidrick & Struggles (NASDAQ:HSII) are (begging your pardon) struggling, then it seems likely that the companies they service must not have enough work to go around.

So I read Tuesday's Q4 and full-year report out from international employer Manpower (NYSE:MAN) with great interest. Because the firm generates four-fifths of its revenues outside the U.S., it gives one of the broadest pictures available of where the global economy is heading.

Unfortunately, that direction appears to be down. Now, that conclusion may not be obvious, judging from the surface-level numbers that Manpower issued, so let me explain. Last quarter, Manpower reported:

  • A 16% rise in sales to $4.7 billion.
  • An 88% rise in profits to $1.90 per share.

Pretty impressive, huh? Unfortunately, nearly half of the firm's sales growth was due to foreign profits being translated into devalued U.S. dollars. And 74% of the firm's profits growth derived from the sale of its Nordic facility-management services unit; another 8% came from the same effects of currency translation that boosted revenues. Net all that out, and you're looking at something more like 9% sales growth, and 6% profits growth.

Next quarter doesn't look much better. According to management, the firm expects to earn $0.57 to $0.61 per share in Q1 2007. Thus, it must hit the very top of its guidance just to meet Wall Street's expectations ($0.61). Even then, the firm expects to rely on $0.04 worth of foreign currency adjustments to meet its own goal.

Mind you, I'm not knocking Manpower per se. In the past year, the firm racked up truly outstanding numbers for its shareholders. GAAP profits up 58% versus fiscal 2005, and free cash flow up an almost impressive 46% -- both on just an 11% rise in sales -- rank as superb performance. But as for what the company's Q4 numbers, and Q1 guidance, tell us about the world economy in general, yes -- I do see cause for worry here.

Study up on the competition with:

Fool contributor Rich Smith does not own shares of any company named above.