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Staffing Firms Tell 2 Q1 Tales: Tech's Hot, Hiring Abroad Is Not

Nothing is permanent in today's uneven global economy, especially for staffing firms. But earnings reports from two industry players show that domestic tech hiring was relatively strong in early 2013 while overseas labor demand was weak.

On Assignment (ASGN) earned 20 cents a share in Q1, up 54% vs. a year earlier and 2 cents over analyst forecasts. Pro forma revenue rose 14% to $389.2 million, also beating.

The provider of permanent and temporary staffing to clients in the IT, health and life sciences fields also gave bullish guidance.

"Their niche in the world is a little better insulated because they add more value in the staffing process than anybody else," said Avondale Partners analyst Randle Reece.

Shares soared 10% late after a 1% drop in the regular session.

"On Assignment is mostly domestic at about 97% of sales, and 75% of that is in IT," said SunTrust Robinson Humphrey analyst Tobey Sommer. "The domestic market is substantially better than international markets. And within the domestic market IT is among the best areas for staffing," he said.

That was good news after fellow staffing outfit Robert Half International (RHI) fell 10%. Late Tuesday it said EPS rose 18% while revenue grew less than 1%, both missing views. Guidance was soft too.

Robert Half's weak spot was overseas, about 25% of sales. International revenue fell 8.8% vs. a year earlier, largely in Europe.

U.S. revenue growth slowed to 6.3%, but was still positive.

Despite pockets of strength — such as IT — broader labor conditions are not improving. A sluggish economic recovery is a key factor. But Reece said the main head wind now is ObamaCare's employer mandate.

"That has put a number of employers in a cautious stance as they try to get a handle on what health care costs will look like next year," he said.

When employers renew their health plans at year-end, those costs are going to take "an unusual leap," Reece added.

He said that economic growth "is slow enough where the urgency to hire isn't that instant.

SunTrust's Sommer called the U.S. employment situation "choppy and a little inconsistent." But demand for accounting, finance and other professionals, a key area for Robert Half, is much firmer than for blue collar jobs.

"Robert Half's results weren't all that bad, just a little weaker than what it had reported in the previous quarter," said Morningstar analyst Barbara Noverini. "As the economy continues to improve in the U.S. we will see ebbs and flows in hiring activity.

Overall, Robert Half has a strong staffing network that will weather "short-term blips in hiring trends," she said.