U.S. Labor Department’s weekly jobless claims data for the week ended Jul 14 provides fresh evidence that the labor market remains robust. In fact, the metric dropped to its lowest level in 48 and 1/2 years. The U.S. labor market is a picture of health at the moment fueled by strong job additions and record-low unemployment.
Job additions continued to be substantial in June, indicating that hiring remains robust even as the economy nears full employment. During the last 12 months, Professional and business services sector recruited the most, followed by healthcare, manufacturing and construction. With job gain likely to continue in the coming months, picking stocks from these sectors looks like a prudent option at this stage.
Jobless Claims Continue to Slip
On Jul 19, the U.S. Labor Department data revealed that weekly jobless claims decreased 8,000 to a seasonally adjusted 207,000 for the week ended Jul 14. This exceeded the consensus estimate of 221,000 and was the lowest level experienced since Dec 6, 1969.
The four-week moving average of initial claims dropped 2.750 to 220,500 for the week ended Jul 14. This metric is considered a better measure of labor market trends as it eliminates weekly fluctuations. However, the four-week moving average of continuing claims increased 6,250 to 1.73 million.
Labor Market Remains Solid
On Jul 6, the Department of Labor reported that the U.S. economy added 213,000 non-farm jobs in June outpacing the consensus estimate of 196,000. Unemployment rate has increased from 3.8% in May to 4% in June. However, the rise in unemployment rate is primarily due to 0.2% increase in the labor force participation rate. In June, 601,000 Americans re-entered in the job market.
Professional & Business Services Leads Job Gains
According to the latest report (Jul 6, 2018) of the Department of Labor, the professional and business services sector added highest number of 521,000 jobs in the U.S. economy in the last 12 months.
Healthcare sector was the second largest recruiter adding 309,000 jobs in last 12 months. Meanwhile, manufacturing and construction sectors also recruited heavily with manpower addition of 285,000 and 282,000 over the year.
Our Top Picks
Solid macro-economic fundamentals, government’s tax reform along with sustained strong earnings performance are major tailwinds for the U.S. economy. These positives will enable employers to hire more skilled laborers. Consequently, adding stocks from those sectors which recruited the most in recent past will be lucrative. However, picking winning stocks can be a difficult task.
This is where our VGM Score comes in handy. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.
We have narrowed down our search to five stocks, each of which has either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below depicts price performance of our five picks in the last three months.
Korn/Ferry International (KFY - Free Report) is the world's leading and largest executive recruitment firm with the broadest global presence in the executive recruitment industry. It sports a Zacks Rank #1 and a VGM Score of B. Korn/Ferry International has expected earnings growth of 18.4% for current year. The Zacks Consensus Estimate for the current year has improved by 5.6% over the last 60 days.
Amedisys Inc. (AMED - Free Report) is a leading provider of healthcare in the home with a vision of becoming the premiere solution for patients. It sports a Zacks Rank #1 and a VGM Score of A. Amedisys has expected earnings growth of 41.6% for current year. The Zacks Consensus Estimate for the current year has improved by 3% over the last 60 days.
Actuant Corp. is a leading global provider of branded hydraulic tools and solutions, specialized products and services as well as highly engineered position and motion control systems for energy markets. It sports a Zacks Rank #1 and a VGM Score of B. Actuant has expected earnings growth of 27.7% for current year. The Zacks Consensus Estimate for the current year has improved by 2.9% over the last 60 days.
Caterpillar Inc. (CAT - Free Report) is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. It carries a Zacks Rank #2 and a VGM Score of A. Caterpillar has expected earnings growth of 56.3% for current year. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 60 days.
Terex Corp. (TEX - Free Report) is a global manufacturer of lifting and material processing products and services that deliver lifecycle solutions to maximize customer return on investment. It carries a Zacks Rank #2 and a VGM Score of B. Terex has expected earnings growth of 115.6% for current year. The Zacks Consensus Estimate for the current year has improved by 0.6% over the last 60 days.
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