The United States has seen another spurt in hiring in July after two months of solid show, indicating that companies are still able to find workers in a strengthening economy. The headline jobless rate also edged down. Let us, thus, look at stocks that have made the most of the promising jobs report.
Payrolls Rise for 94 Straight Months
The U.S. economy added 157,000 new jobs in July despite extensive complaints among business houses about shortage of skilled labor, per the Labor Department. Even though the number of jobs added in July fell short of 195,000 predicted by market pundits, U.S. employment has risen for 94 successive months, the longest jobs-expansion streak on record.
By the way, smaller gains in hiring last month were a one-off factor. It was mostly due to the government trimming jobs in education during the summer break. Otherwise, hiring could have easily topped 200,000.
Nonetheless, nonfarm payroll did increase more than 120,000 jobs per month required to keep up with growth in the working-age population. Lest we forget that the economy also created 59,000 more jobs in May and June than earlier reported. Thus, the average gains for the three-month period came in a solid 224,000.
Ryan Detrick, senior market strategist at LPL Financial, added that “the headline number might have missed targets, but remember May and June were revised higher. In fact, those two months are now the two strongest months since July 2016.”
The jobless rate, in the meantime, dropped to 3.9%. This is the eighth time that the unemployment rate has fallen below the 4% mark since 1970. The current unemployment rate is now at a nearly two-decade low. The real unemployment rate, also known as the U6, contracted to 7.5% from 7.6%. The U6 now stands at a level lower than it was during the 2007-2009 recession.
Broad-Based Jobs Additions
Business services, leisure and hospitality, and manufacturing primarily led job gains in the month of July. White-collar professional firms added the maximum number of jobs in the month, the increase being 51,000 positions. Among such gains, more than half came from administrative and supportive services.
Industries that include restaurants and bars, performing arts, spectator sports and museums took on an additional 40,000 workers, adding to their solid May and June gains. Meanwhile, manufacturing beefed up by 37,000 staff, the strongest gain since December. Factory jobs growth accelerated for the third straight month in July. Needless to say, the manufacturing sector added 327,000 new jobs over the past year, representing the best 12-month stretch in 23 years.
Health care and social assistance added 34,000 jobs, while construction took in 19,000 new workers despite a slowdown in the housing sector. Retail employment, which more or less tends to be more volatile than other sectors, added 7,100 jobs last month after a loss of more than 21,000 in June.
How to Play the Steady Job Addition?
July’s jobs report painted a pretty picture of an economy with opportunities for almost everyone. Such a robust hiring spree indicated that the aforesaid industries are in an expansion mode and their businesses are churning out huge profits. Hence, investing in the same seems prudent for now.
Further, the latest job addition bodes well for staffing companies. Additionally, the Conference Board’s Employment Trends Index was 108.94 in June, up from 107.72 in May. When compared to the year-ago level, the index shows a rise of 5.2%.
Gad Levanon, chief economist, North America, at The Conference Board added that “as expected, after decreasing in May, the Employment Trends Index continued its solid path upwards in June, with positive contributions from all of its components. The labor market will continue to tighten in the coming months, with strong employment growth outpacing the number of people entering the labor force.”
The buoyancy in the staffing space is further confirmed by its solid Zacks Industry Rank in the top 45%, 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.
5 Solid Choices
We have picked five such stocks that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
SPS Commerce, Inc. (SPSC - Free Report) provides cloud-based supply chain management solutions. Currently, the company has a Zacks Rank #1. In the last 60 days, six earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 17.5% in the same period. The company’s projected growth rate for the current year is 75%, while the Business - Services industry is expected to gain only 7.1%.
BJ's Restaurants, Inc. (BJRI - Free Report) owns and operates casual dining restaurants in the United States. The company currently has a Zacks Rank #1. In the last 60 days, nine earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings went up 6.5% in the same period. The company’s projected growth rate for the current year is 50.4%, while the Retail - Restaurants industry is expected to gain only 10.3%.
Altra Industrial Motion Corp. (AIMC - Free Report) designs, produces, and markets mechanical power transmission components. Currently, the company has a Zacks Rank #1. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings increased 2.8% in the same period. The stock’s projected growth rate for the current year is 23.9%, while the Manufacturing - General Industrial industry is expected to gain 23.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
BG Staffing, Inc. (BGSF - Free Report) provides staffing services in the United States. It operates through three segments: Multifamily, Professional, and Commercial. The company currently has a Zacks Rank #1. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 12.9% in the same period. The company’s projected growth rate for the current year is 47.5%, while the Staffing Firms industry is expected to gain only 19%.
Kforce Inc. (KFRC - Free Report) provides professional staffing services and solutions in the United States and internationally. It operates through Technology (Tech), Finance and Accounting (FA), and Government Solutions (GS) segments. Currently, the company has a Zacks Rank #2. In the last 60 days, four earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings advanced 2.3% in the same period. The stock’s projected growth rate for the current year is 43.3%, while the Staffing Firms industry is expected to gain only 19%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>