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Initial Claims Drop to 52-Year Low: Top 5 Staffing Picks

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The U.S. labor market is showing signs of resilience as businesses continue to add more manpower despite higher wages. The Omicron variant of coronavirus, global supply-chain disruptions and mounting inflation failed to decelerate the recruitment process.  The latest weekly jobless claims data highlighted the same.

At this stage, it will be prudent to invest in staffing stocks with a favorable Zacks Rank as higher recruitment will increase their scope of business resulting in enhanced profits. Five of them are — Kforce Inc. (KFRC - Free Report) , Cross Country Healthcare Inc. (CCRN - Free Report) , Robert Half International Inc. (RHI - Free Report) , KornFerry International (KFY - Free Report) and DLH Holdings Corp. (DLHC - Free Report) .

Initial Claims Drops to Record Low Level

On Mar 24, the Department of Labor reported that the weekly jobless claims fell to 187,000 for the week ended Mar 19  — the lowest level since September 1969. The consensus mark was 211,000. It is worth mentioning that, initial claims hit a record high of 6.149 million in April 2020, on the onset of the coronavirus outbreak.

The labor market, which was the best-performing segment of the U.S. economy before the outbreak of coronavirus, suffered the most during the pandemic. However, the U.S. labor market has been systematically heading toward stabilization since the beginning of 2022.

Continuing claims — those who have already received government benefits and reported with one week lag — decreased by 67,000 to 1.350 million for the week ended Mar 12, marking the lowest since January 1970.

The Department of Labor reported that job openings remained elevated despite higher wages. At the end of January, 11.3 million jobs were vacant. This implies that approximately 1.8 jobs are available per unemployed American. The nonfarm payroll data for February showed that the unemployment rate fell to 3.8% from 4% in January. The Fed has estimated that unemployment will decline to 3.5% in 2022.   

Catalysts for Staffing Industry

The staffing industry comprises companies that provide a wide range of services related to human resources, and workforce solutions and services. Of late, the industry has been witnessing growth in revenues and income. It stands to benefit from the gradual resumption of business activities, which were postponed or restricted by the coronavirus-triggered strict lockdowns worldwide. This led to additional hiring and wage increase.

The steadily improving U.S. economy, backed by an uptick in manufacturing and service activities, led to additional hiring and wage increase. The Institute for Supply Management measured that both Manufacturing PMI and Services PMI recorded the 21st consecutive month of expansion in February.

The growing adoption of technologies is likely to act as a major catalyst for the staffing industry going forward. Technology-based recruiting techniques like social media, mobile technology, artificial intelligence and Big Data have become immensely popular.

Video-conferencing tools, such as Google Meet, Zoom, Skype and Microsoft Teams are being used to communicate with clients, conduct interviews and meetings, manage staff virtually, and handle remote training and remote surveillance. Technologies like the cloud and blockchain offer more storage and safety to HR data. These trends should keep demand for staffing services in good shape.

Our Top Picks

We have narrowed our search to five staffing stocks that have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Zacks Investment Research
Image Source: Zacks Investment Research

Kforce is a full-service, web-based specialty staffing firm providing flexible and permanent staffing solutions in the United States. KFRC operates through the Technology and Finance and Accounting segments. kforce.com offers web-based services including online resumes and job postings, interactive interviews and job placements and career management strategies.

Kforce has a Zacks Rank #1 and an expected earnings growth rate of 19.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.9% over the last 60 days.

Cross Country Healthcare is a leading provider of innovative healthcare workforce solutions and staffing services in the United Sates. CCRN’s diverse client base includes both clinical and nonclinical settings, servicing acute care hospitals, physician practice groups, outpatient and ambulatory-care centers, nursing facilities, both public schools and charter schools, rehabilitation and sports medicine clinics, government facilities, and homecare.

Although Cross Country Healthcare, which sports a Zacks Rank #1, has a negative earnings growth expectation for the current year, the Zacks Consensus Estimate for current-year earnings has improved 15.4% over the last 30 days.

Korn Ferry is the world's leading and largest executive recruitment firm with the broadest global presence in this industry. KFY operates through four segments: Consulting, Digital, Executive Search, and Recruitment Process Outsourcing & Professional Search.

Korn Ferry has a Zacks Rank #2 and an expected earnings growth rate of more than 100% for the current year (ending April 2022). The Zacks Consensus Estimate for current-year earnings has improved 5.5% over the last 30 days.

Robert Half International provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. RHI operates through three segments: Temporary and Consultant Staffing, Permanent Placement Staffing, and Risk Consulting and Internal Audit Services.

Robert Half International has a Zacks Rank #2 and an expected earnings growth rate of 15.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.6% over the last 60 days.

DLH Holdings serves clients throughout the United States as a full-service provider of healthcare, logistics, and technical support services to DoD and Federal agencies. DLHC offers health solutions including healthcare, technology, and logistics solutions to the VA, Defense Health Agency, Tele-medicine and Advanced Technology Research Center, Navy Bureau of Medicine and Surgery, and the Army Medical Research and Material Command.

DLH Holdings has a Zacks Rank #2 and an expected earnings growth rate of 65.4% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the last 60 days.