The labor market added jobs at a strong clip in November and has moved past a couple of months of hurricane disorders. Record low unemployment rate also reflected the strength in the labor market. Increase in average work week, in the meantime, suggests the possibility of increased hiring in the near term.
Staffing companies stand to gain from the strengthening labor market, while President Donald Trump’s tax cut proposal will lift the economy and boost wages. Thus, investing in such companies seems prudent.
Strong Hiring Show
U.S. employers added 228,000 jobs in November, steering past expectations of 200,000. In fact, job additions in the U.S. economy topped the 200,000 mark for the second straight month, reflecting a bounce back after hurricanes in Texas and Florida affected hiring in September.
Construction jobs, which fluctuate depending on weather conditions, increased by 24,000. Home building recovered significantly from storm-related disturbances. Manufacturing payrolls gained 31,000, while health care and professional and business services showed steady gains. Restaurants and bars, which have seen the highest payroll gains in the last two months due to storms, added 18,900 workers. Job additions were, in fact, broad-based with white-collar firms and educational organizations contributing the maximum at about 54,000.
Private Sector Adds Jobs
Private employment, in the meantime, added 221,000 jobs last month after 247,000 in the prior month, according to the Labor Department.
Automatic Data Processing, Inc. (ADP - Free Report) , however, reported that employment in the private sector rose by 190,000 in November, with the manufacturing sector adding the maximum number of jobs in at least 15 years. Service-sector also saw job additions, with education and health services, and professional and business services leading the advance. Nonetheless, both the agencies reported healthy private sector job additions.
Jobless Rate Drops, Average Work Week Rises
The unemployment rate was unchanged at 4.1% in November and continues to remain at a 17-year low. The U6 unemployment rate was 8% last month, up from 7.9% in the prior month. But, the broadest measure of unemployment and underemployment remained near the lowest since 2006.
Average workweek for American workers, in the meanwhile, edged up to 34.5 hours from 34.4. The average workweek for all workers rose to a five-month high, which indicated that companies are making existing employees work harder that may ultimately lead to hiring of more permanent staffers.
Trump’s Tax-Cut Proposal to Boost Wages
Average hourly earnings rose by 5 cents to $26.55, while the annual gain increased to 2.5% from 2.4%. But, yearly growth continues to hover around 2.5% for well over a year. Nonetheless, Trump administration’s initiative to overhaul the tax code and increase infrastructure spending will spur growth and eventually boost wage growth.
The Senate has already voted 51-49 to approve the Republican tax bill. The bill trims the corporate tax rate from 35% to 20%, marking the biggest one-time drop in big business tax rates.
4 Staffing Picks for a Healthy Labor Market
The latest job numbers bode well for staffing companies. Meanwhile, Trump had earlier met chief executives of the country’s biggest manufacturers and pledged to return jobs to millions in the United States. The buoyancy in the staffing space is also confirmed by its solid Zacks Industry Rank in the top 24%, indicating continued hiring and more job opportunities. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
We have, thus, selected four staffing stocks that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are well positioned to grow in the near term.
Heidrick & Struggles International, Inc. (HSII - Free Report) — a Zacks Rank #1 company — provides executive search, culture shaping and leadership consulting services. The company enables its clients to build leadership teams by facilitating the recruitment, management and deployment of senior executives. The company has an average four-quarter positive earnings surprise of 0.9%. The stock’s expected growth rate for the next year is 892%, way higher than the industry’s projected gain of 13.9%.
Kelly Services, Inc. (KELYA - Free Report) provides workforce solutions to various industries worldwide and is headquartered in Troy, MI. Currently, the company has a Zacks Rank #1. It has an average four-quarter positive earnings surprise of 65.9%. The stock’s expected growth rate for the current year is 30.8%, higher than the industry’s projected gain of 8.2%. Kelly Services’ earnings are set to grow next year. You can see the complete list of today’s Zacks #1 Rank stocks here.
DLH Holdings Corp. (DLHC - Free Report) offers staffing services to the federal government sector in the United States. The stock has a Zacks Rank #2. The company has an average four-quarter positive earnings surprise of 9.6%. The company’s expected growth rate for the current year is 29.6%, higher than the industry’s projected gain of 8.2%. The company’s earnings are poised to grow in 2018.
Randstad Holding NV (RANJY - Free Report) is a staffing and recruitment company that provides solutions in the field of flexible work and human resources (HR) services. The stock has a Zack Rank #2. It has an average four-quarter positive earnings surprise of 9.3%. The stock’s expected growth rate for the current year is 16.3%, higher than the industry’s projected gain of 8.2%. The company’s earnings are set to grow 11.1% in 2018.
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