ASGN (ASGN), Robert Half International (RHI) as well as the US staffing and consulting industry face both cyclical and structural headwinds, with automation and artificial intelligence reshaping labor demand even as macroeconomic uncertainty clouds recovery prospects for the sector, UBS said in a note on Monday.

The investment firm said temporary employment penetration, or the share of temp workers as a percentage of total nonfarm payrolls, has fallen about 25% from its March 2022 peak, despite the absence of a recession. UBS said this reflects economic softness and longer-term technology shifts that may prevent the industry from fully recovering to prior peaks in the next upcycle.

UBS has sell ratings on both ASGN and Robert Half International, citing weak near-term fundamentals and the potential for continued volatility. It set price targets of $47 for ASGN and $30 for Robert Half.

UBS said ASGN's revenue mix has shifted more toward consulting, with 63% for consulting and 37% for temporary assignments as of the June quarter. The analysts added that margins remain under pressure from cyclical weakness in key verticals such as financial services and technology.

UBS said Robert Half faces similar challenges, with automation and AI tools reducing time-to-hire and potentially lowering client demand for temporary staffing services.

ASGN and RHI are due to report Q3 results on Wednesday.

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