IT, temp hiring shows employer caution

NEW YORK (Reuters) - U.S. employment companies are reporting higher demand for temporary and technology workers, in a sign that business confidence is returning but that employers are still reluctant to hire full-time workers.

Employers need a flexible workforce as they await concrete evidence that demand is returning for their products or services, so they are dedicating resources to technology and to spending on contingent or contract workers.

Adecco SA, the third-biggest employer in the United States behind Wal-Mart Stores and the postal service, says clients are investing in information technology (IT) to boost productivity.

"IT has maintained strength that you normally wouldn't see this early in the recovery," said Tig Gilliam, who heads Adecco's North American operations.

Adecco's engineering and technology business, which fills positions related to infrastructure and network engineering, currently has 1,500 job openings nationwide, up from about 1,000 six months ago. An Adecco consulting business is also seeing higher demand for tech professionals.

"They're hiring project managers and business analysts and developers, quality assurance folks, and they're doing that so they don't have to hire in other categories," Gilliam said.

Gilliam said strength in IT was "making its way into other areas," like finance. Adecco is also seeing a pick-up in hiring of light-industrial temporary workers and those in areas like logistics and transport. Historically, this precedes hiring in retail and in professional categories, and light-industrial is typically the first to turn up during a recovery.

A TENTATIVE RECOVERY

Whenever the economy gets better, businesses tend to spend on critical tech projects first, said Scot Melland, chief executive of Dice Holdings Inc, which runs specialized websites for jobs in finance, technology and other fields.

The number of searches of Dice's resume database increased in the fourth quarter from the third, Melland said, and the number of tech job postings has risen to 50,400 from 47,000 a few months ago.

"The tech job market is back and is getting better," Melland said. Employers need more software developers, database and system administrators, network engineers and project managers -- jobs that account for the bulk of tech recruiting.

But Melland cautioned: "Tech doesn't necessarily lead hiring in other categories."

Staffing industry executives and analysts see both evidence of recovery and reasons for caution over whether a sustainable rebound is under way. Friday's jobs report suggested expectations of a fast recovery were unduly optimistic.

The U.S. economy unexpectedly shed 85,000 jobs outside the farm sector in December, while the unemployment rate held steady at 10 percent. Analysts polled by Reuters had expected nonfarm payrolls to be unchanged.

The unemployed are out of work longer and the number of people who have stopped looking for work has climbed, suggesting the jobless rate has further room to rise.

MORE TEMP JOBS

Meanwhile, the government report showed the fifth consecutive sequential increase in temp jobs, whose increase from November was much stronger than historical norm.

Demand for temporary workers is typically a leading indicator of eventual hiring of permanent workers because temps provide flexibility, said Brad Sorensen, director of market and sector analysis at Schwab Center for Financial Research.. But he said not to read too much into the report.

"It really doesn't tell us a lot, because it's the last indicator to come around after the economy recovers," Sorensen said.

Adecco's Gilliam said many full-time jobs will start out as temporary or contract positions in this recovery. The percentage of temps in the labor force will rebound and eventually top 3 percent, the 2006 high, he predicted.

He added, however, that he would feel more optimistic about hiring prospects if the government report had shown an increase in average hours worked. With weekly hours steady at 33.2, employers are not yet making more use of existing capacity, so they have less need to add staff.

Overall, employer confidence is improving, Gilliam said. Discussions with clients are more often about returning workers than about slimming down, though clients remain cautious over the prospect of a double-dip recession.

"The economy is clearly improving," Gilliam said. "But does that mean it's going to accelerate? Of course not."

(Editing by Steve Orlofsky)