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In a Tight Employment Market, Staffing Services are in Demand

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In May, the U.S. Bureau of Labor Statistics released its monthly jobs report which included a headline number of 3.9% unemployment.  This is the first time unemployment has been under 4% since 1998 and basically a tie with the lowest figures recorded since the accounting began in 1948. (There were a few months with unemployment under 3% in the early 1950s.)

While there is some disagreement over the mechanics of the measurement – notably, it tends to underrepresent people who are underemployed in terms of responsibility or hours worked and those who have completely stopped looking for work – it’s obvious that the employment situation in the U.S. is as strong as it has been in a long time.

Wages are growing, albeit slowly, increasing at about 4% over the previous year, and there are $6.5 million jobs unfilled in the U.S.  High tech workers are increasingly in demand as innovative companies in the new economy seek to fill the skilled positions that will allow them to continue growing into the future.

The services of firms that provide assistance in finding, screening, and hiring new employees and providing Human Resources solutions have never been in higher demand.

Kforce, Inc (KFRC - Free Report) is a web-based specialty staffing firm that provides conventional employment services to a wide range of industries. The company’s flagship “Tech Flex” service is especially popular with high-tech companies who often have immediate need for applicants with specific skills.  Recognizing the project-based nature of technology, Kforce matches qualified employees with customers who need require coders, systems administrators and cyber-security experts for a specific amount of time.

With a series of earnings beats lately, investors have taken notice of the strong demand for Kforce’s unique model and the stock is up 20% in the past month.  Recent analyst upward revisions make Kforce a Zacks Rank #1 (String Buy).

Heidrick and Struggles International (HSII - Free Report) is an employment search and consulting firm that concentrates primarily on Senior-level executives. In addition to traditional search and screening services, HSII also provides ongoing support in the form of leadership consulting and corporate management and culture-shaping initiatives.

Coming off a big Q1 earnings beat in which they reported net earnings of $0.53/share versus a Zacks Consensus Estimate of $0.32, and thanks to improved guidance for second quarter revenue to a range of $160m - $170M, three analysts have raised their 2018 earnings estimates in the past 30 days, earning HSII a Zacks Rank #1 (Strong Buy).

Insperity Inc. (NSP - Free Report) – formerly “Administaff” – provides a broad array of employment services, including traditional search and screening, but also Human Resource solutions like Time and Organizational management, Time and Attendance Tracking and even Insurance and Retirement Plan Assistance.  Their varied product offerings are popular with customers who prefer to concentrate on their core businesses and outsource the nuts and bolts of H.R.

A Zacks Rank #1 (Strong Buy), Insperity has been a solid earnings performer, beating estimates in each of the past 4 quarters by an average of better than 20%.

In a growing economy with tight labor markets, investors should note that Employment and Human Resource Solutions Providers are selling exactly the services a wide range of companies badly need.

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