Hedging against Job Loss

You can't hedge against the idiosyncratic risk of losing your job, but you can hedge against rising unemployment nationally. The North American Derivatives Exchange (Nadex.com, formerly Hedgestreet.com) offers options on the unemployment rate and other economic events. I did a quick search to see if any financial writer had suggested these options as part of a strategy to hedge against the risk of unemployment. So far, I haven't found any.

I'm curious also about whether the managers of staffing firms have used these options. A number of publicly-traded staffing firms had significant amounts of net cash on their balance sheets last year; did any of them use some of that net cash to hedge against an increase in the unemployment rate? If they did, they'd have even more cash now.

Barrett Business Services Up 35% intra-day on Earnings Surprise

Barrett (Nasdaq: BBSI) is the staffing/PEO company that I described buying too early in the "Anatomy of a Mistake" section of the post "From Joel Greenblatt to Jim Rogers, Part III: The Importance of Macro Trends". Today it's up after announcing 2Q earnings of 29 cents per share after the close yesterday, beating the consensus estimate of 22 cents per share. The company also raised its guidance for Q3. These earnings are especially surprising given the CEO's bearish comments on the California labor market during the last conference call. On that call, he estimated that California (where the company does more than half of its business) had an unemployment rate of about 7.5%. I'm still down a lot from where I bought BBSI, but I am content to continue holding this one.