The staffing industry acts as a bridge between employees and employers. Apart from a few internal factors (which vary from one company to another) that impact staffing services, external factors such as global presence, technological advancements, skilled professionals, government rules and regulations and economic conditions play a major role.
To this end, the U.S. economy currently looks strong on the back of improving employment scenario and robust manufacturing and non-manufacturing activities along with Trump administration’s business friendly approach. In such a scenario, it is not a bad idea to invest in the staffing companies.
Unemployment Rate Down Again Despite Strong Labor Market
Per the latest data from U.S. Bureau of Labor Statistics, unemployment rate was down to 3.8% in May compared with 3.9% in April and 4.1% in March. Moreover, the unemployment rate was the lowest in 18 years and down 0.5 percentage point year over year.
Meanwhile, U6, the most rigorous metric of unemployment in the United States, declined to 7.6%, its lowest since May 2001. This measure takes into account individuals who are not searching for employment or those who are working part-time since they cannot secure full-time employment.
Although a tighter labor market is leading to better wage growth, it remains below long-run averages. Average hourly earnings in May increased 8 cents to $28.92, registering only a 2.7% year-over-year increase, higher than 2.6% witnessed in April. Average workweek remained flat at 34.5 hours.
Job Additions Trend Strong
The U.S. economy added 223,000 jobs in May, significantly higher than 164,000 in April and 103,000 in March. Monthly job additions have averaged 191,000 in the past year. Job additions for March and April were revised upward by a combined 15,000. The labor force participation rate and the employment-to-population ratio were 62.7% and 60.4%, respectively, a marginal change from April.
At the forefront of job gains last month was education and health services that added 39,000 jobs, the highest in a month’s time frame. This was followed by professional and business services, and retail trade, each adding 31,000 jobs in May. Job additions in manufacturing and construction were 18,000 and 25,000, respectively. Mining added 6,000 jobs.
However, considering a year’s time frame, employment in professional and business services has been the highest with an addition of 483,000.
Momentum to Continue Through 2018
The labor market remains strong, as it has been during most of the economic expansion that started in mid-2009. Broadly, the Trump administration’s business friendly approach, a strong U.S. economy, reduced tax rates, robust manufacturing and non-manufacturing activity, and higher government spending should support additional hiring and wage gains this year.
Per a new industry forecast by Staffing Industry Analysts (SIA), U.S. staffing industry revenues are anticipated to witness constant currency growth of 7% in 2018 and 6% in 2019.
4 Staffing Picks in a Healthy Labor Market
The latest job numbers bode well for staffing companies. The buoyancy in the staffing space is further confirmed by its Zacks Industry Rank in the top 32% (83 out of the 250 plus groups).
So, adding staffing stocks to your portfolio makes sense at this point. However, picking winning stocks can be a difficult task.
With the help of the Zacks Stock Screener, we have zeroed in on four promising stocks from the sector. These stocks have a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) and solid expected earnings growth rate for the year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s have a look at the four key picks:
Heidrick & Struggles International, Inc. (HSII - Free Report) is a provider of executive search, culture shaping, and leadership consulting services. It currently sports a Zacks Rank #1. The company’s expected earnings growth rate for the current year is 66.1%. The Zacks Consensus Estimate for the current year improved 17.5% in the last 60 days.
BG Staffing, Inc. (BGSF - Free Report) is a national provider of temporary staffing services across a diverse set of industries. It currently carries a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 37.6%. The Zacks Consensus Estimate for the current year improved 0.7% in the last 60 days.
Insperity, Inc. (NSP - Free Report) is a provider of human resources and business solutions. It currently sports a Zacks Rank #1. The company’s expected earnings growth rate for the current year is 39.2%. The Zacks Consensus Estimate for the current year improved 12.2% in the last 60 days.
Kforce, Inc. (KFRC - Free Report) is a professional staffing services firm. It carries a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 40.1%. The Zacks Consensus Estimate for the current year improved 3.3% in the last 60 days.
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