Per the latest report from the Bureau of Labor Statistics, the economy added 213,000 jobs in June on the back of strong performances from professional and business services, manufacturing and healthcare.
Although the metric was down from the May figure of 244,000, it was way above analysts’ expectation of 195,000. The addition points toward a consistently tight labor market and robust economic growth despite mounting U.S. trade tensions. Investors should make the most of this opportunity and bet on stocks from the staffing space.
Payroll Gains Strong for the Second Consecutive Month
Job additions were well above the 200,000 mark for the second month in a row despite labor shortage. Professional and business services was at the forefront and added 50,000 jobs. Manufacturing and healthcare gained 36,000 and 25,000 respectively. Construction was up 13,000 while retail cut 22,000 jobs.
Although unemployment rate increased 0.2% to 4%, it was because more people (601,000 to be precise) were absorbed into the worker friendly labor market. Evidently, labor force participation rose 0.2% to 62.9%.
Meanwhile, average hourly earnings increased 0.2% to $26.98 an hour. Consequently, the yearly increase in wages remained unchanged at 2.7% in June. One factor impeding the growth in wages was a fall in full-time positions by 89,000.
The employment-to-population ratio stayed steady at 60.4%, the highest level since January 2009. Economists say that healthy job gains should push unemployment rate down in the rest of the year.
Investors Shrugging Off Trade War Fears
Minutes released from the June Federal Open Market Committee meeting revealed that most participants had noted a possible negative impact of trade policy related uncertainty on business sentiment and investment spending. This could impact new hiring as well.
Members, however, viewed the tax cut and higher government spending as beneficial for economic growth, which we believe are currently encouraging businesses and investors.
Meanwhile, GDP rose 2% in the first quarter. Federal Reserve officials have expressed concerns that letting the economy grow too strong could result in higher inflationary pressure and financial imbalances, eventually leading to economic downturn. Thus, majority of officials at the central bank are supporting interest rate hikes at regular basis.
In spite of this, GDP is widely projected to rise close to 4% in the second quarter, driven by high levels of consumer and business sentiment and growing levels of investment. The Atlanta Federal Reserve stated on Jul 2 that it expects the U.S. economy to grow at an annualized pace of 3.8% in the second quarter compared with 2% in the first quarter.
4 Best Choices
Despite the trade war-related worries, recruitment trend in the United States remained strong in June. With the biggest recruiter of the month being professional and business services, adding stocks from this sector looks like a smart choice.
We have selected the following stocks, each of which has a Zacks Rank #1 (Strong Buy) or 2 (Buy) and Value Growth Momentum Score (VGM Score) of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 offer the best investment opportunities for investors.
Everi Holdings Inc. (EVRI - Free Report) , a technology solutions provider to the casino gaming industry, sports a Zacks Rank #1 and has a VGM Score of B. The company’s projected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 100% over the past 60 days.
Online marketing services provider iClick Interactive Asia Group Limited (ICLK - Free Report) has a Zacks Rank #2 and VGM Score of B. The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year improved from a loss of 6 cents to earnings of 2 cents in the past 60 days.
Financial technology and bank holding company Green Dot Corporation (GDOT - Free Report) carries a Zacks Rank #2 and VGM Score of B. The company’s projected earnings growth rate for the current year is 39.4%. The Zacks Consensus Estimate for the current year has improved 0.3% over the past 60 days.
Regulated and specialized waste for disposer Stericycle, Inc. (SRCL - Free Report) carries a Zacks Rank #2 and VGM Score of B. The company expects earnings growth of 6.7% for the current year. The Zacks Consensus Estimate for the current year improved 0.4% in the past 60 days.
Three Months Price Performance