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Jobless Claims Slip to a 45-Year Low: Buy 5 Staffing Stocks

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Americans filing for unemployment benefits plunged to a 45-year low last week, indicating strong job growth. Job additions rose at a steady pace in January, and the record low unemployment rate and strong wage growth show that the labor market is in good shape. The year, in fact, is off to a sizzling start for job creation as several indices measuring employment trends moved north last month.

Staffing companies stand to gain as the labor market strengthens, while President Trump has also urged the country’s top executives to step up hiring. In fact, one of his core campaign policies was to bring back millions of jobs for Americans.

Jobless Claims Tank to Lowest in 45 Years

Jobless claims fell by 7,000 to 222,000 in the week ending Feb 17. This marked the second-lowest level since the end of Great Recession of 2007-09. In fact, the four-week moving average that evens out sharp fluctuations in weekly reports declined by 2,250 to 226,000.

The average level of jobless claims continues to hover just over the 200,000 mark, which was last seen in the early 1970s. This is a clear sign that the labor market may strengthen in the near term, helping the economy roar back to life. After all, the lesser the number of people filing for unemployment benefits, the more Americans have jobs.

Upbeat Labor Market

Most firms continue to hire as the unemployment rate stayed at a 17-year low of 4.1% in January, according to the Labor Department. Non-farm payrolls climbed by 200,000 jobs last month after rising 160,000 last December. This means the economy has now added jobs for 88 months in a row.

Employers have also hiked wages in order to retain and attract workers. Wage growth hit the fastest pace in January in more than eight-and-a-half years. Average hourly wages increased 9 cents, or 0.3%, to $26.74. This helped the average year-on-year hourly earnings to rise to 2.9%, the highest since June 2009.

Wages have been largely driven by the Republican tax cut policy and a rise in the minimum wage threshold in several states. Market pundits believe that the tax cut will boost wage growth as companies will use that extra money to give workers a raise (read more: GOP Passes Landmark Tax Bill: Best & Worst for Stocks).

Minimum wage, in the meantime, has already been raised in 18 states in January, which had a positive impact on 4.5 million workers, per the Economic Policy Institute (read more: Wages See Fastest Growth Since 2009: Top 5 Gainers).

Jobs Growth Index Shows No Signs of a Slowdown

Jobs growth is not showing signs of slowing down, per the Conference Board’s Employment Trends Index. The index stands at 106.93 in January, up from 106.59 in December. When compared to the year-ago level, the index jumped 5.4%.

Gad Levanon, Chief Economist, at the Conference Board said that “the Employment Trends Index continues its solid path upwards and shows no sign of slowing down.” He added that “a strong US economy provides additional tailwinds to employment growth, bringing down the unemployment rate even further and encouraging more men and women to join the labor force.”

The nation’s GDP increased at a seasonally adjusted annual rate of 2.6% in the final three months of 2017 following gains in the previous two quarters of more than 3%, per the “advance” estimate released by the Bureau of Economic Analysis. This marked the economy’s strongest stretch of growth since the expansion started in mid-2009. The economy also expanded at a rate of 2.3% for all of 2017 following a meager 1.5% increase in 2016. The growth topped the 2.2% average of the last eight-and-a-half-year long recovery (read more: 5 Winning Stocks for Best Stretch of Growth Since '09).

The manufacturing sector, in the meantime, is solid and the service sector is improving. To meet such growth, hiring is accelerating. In fact, service sector is the bellwether of the U.S. economy, employing around eight out of 10 workers. A sub-index of the ISM services index that shows current staffing and future hiring plans touched an all-time high of 61.6 in January from 56.3 in the prior month.

5 Top Staffing Stocks to Buy Now

The latest numbers bode well for staffing companies. The buoyancy in the staffing space is further confirmed by its solid Zacks Industry Rank in the top 10%, 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 five staffing stocks that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are positioned to grow in the near term.

On Assignment, Inc. (ASGN - Free Report) provides professionals for contract, contract-to-hire, and direct hire assignments in the United States. The staffing firm has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 17.9% in the last 60 days. The company’s expected growth rate for the current year is 23.3% versus the industry’s projected rally of 17.2%.

ManpowerGroup Inc. (MAN - Free Report) provides workforce solutions and services in the United States and internationally. The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings jumped 17.3% in the last 60 days. The company’s expected growth rate for the current year is 27.8%.

Kforce Inc. (KFRC - Free Report) — a Zacks Rank #1 company — provides professional and technical specialty staffing services and solutions in the United States and internationally. The Zacks Consensus Estimate for its current-year earnings rose 21% in the last 60 days. The stock’s expected growth rate for the current year is 35.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Insperity, Inc. (NSP - Free Report) provides human resources (HR) and business solutions to enhance performance of small and medium-sized businesses in the United States. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings climbed 11.7% in the last 60 days. Insperity’s expected growth rate for the current year is 20.8%.

Robert Half International Inc. (RHI - Free Report) provides staffing and risk consulting services in the United States and overseas. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 15.4% in the last 60 days. The company’s expected growth rate for the current year is 24.2%.

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