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Continuing Jobless Claims Plunge to 45-Year Low: 4 Picks

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U.S. Labor Department’s weekly jobless claims data for the week ended Nov 3 provided fresh evidence that the labor market is in strong shape. Since the beginning of this year, the U.S. labor market remains firm buoyed by solid job additions and record-low unemployment.

Job additions continue to be significant in October, indicating that hiring remains robust even with wage rates soaring. Strong non-farm payrolls data for October along with persistent decline in the weekly jobless claim indicates that employers will continue to recruit more employees. At this stage, it makes sense to invest in staffing stocks with a favorable Zacks Rank to enrich portfolio.

Jobless Claims Continue to Decline

On Nov 8, the Department of Labor reported that weekly initial jobless claims fell 1,000 to a seasonally adjusted 214,000 for the week ended Nov 3, in line with the consensus estimate. Prior week’s (ended Oct 27) data was revised upward by 1,000 to show 215,000 initial jobless claim.

The continuing claims (number of people receiving benefits after an initial week of aid) dropped 8,000 to 1.62 million for the week ended Oct 27, the lowest level since Jul 28, 1973. Moreover, the four-week moving average of continuing claims increased 7,500 to 1.63 million, the lowest level since Aug 11, 1973. This metric is considered a better measure of labor market trends as it eliminates weekly fluctuations.

Labor Market Remains Solid

On Nov 5, the Department of Labor reported that the U.S. economy added 250,000 non-farm jobs in October outpacing the consensus estimate of 193,000. Unemployment rate remained flat at 3.7%, the lowest since December 1969. Further, the number of employed individuals increased to a record level of 156.6 million. The employment-population ratio increased 0.2% to 60.6%, its highest level since December 2008. (Read More: Job Growth Breezes Past Estimates: 5 Business Services Picks)

Professional & Business Services Lead

According to the latest report (Nov 5, 2018) of the Department of Labor, the professional and business services sector added the highest number of jobs in the U.S. economy in the last 12 months. The number of job additions by the sector totaled 516,000. For the month of October, professional and business services added 35,000 jobs, second only to 36,000 jobs added by the healthcare sector.

It is noteworthy to mention here that significant job additions in October took place despite soaring wages. Average hourly wage rate in October increased by $0.05 or 0.2% to $27.30. Year-over-year growth in wages increased 3.1%. This is the fastest pace of wage increase recorded since early 2009.  

Our Top Picks

Solid macro-economic fundamentals, tax reforms and sustained strong earnings performance are major tailwinds for the U.S. economy. These positives will enable employers to hire more skilled laborers. Consequently, adding staffing stocks 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 four 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 shows price performance of our four picks year to date.

Heidrick & Struggles International Inc. (HSII - Free Report) provides executive search, culture shaping, and leadership consulting services on a retained basis to businesses and business leaders worldwide. The stock has a Zacks Rank #1 and a VGM Score of A.  You can see the complete list of today’s Zacks #1 Rank stocks here. The company has expected earnings growth of 118.4% for current year. The Zacks Consensus Estimate for the current year has improved by 18.4% over the last 30 days.

Insperity Inc. (NSP - Free Report) provides human resources and business solutions to enhance business performance for small and medium-sized businesses in the United States. The stock has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of 49.8% for current year. The Zacks Consensus Estimate for the current year has improved by 4.3% over the last 30 days.

BG Staffing Inc. (BGSF - Free Report) provides temporary staffing services across a diverse set of industries in the United States. The stock has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 68.3% for current year. The Zacks Consensus Estimate for the current year has improved by 4.3% over the last 30 days.

Robert Half International Inc. (RHI - Free Report) provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. The stock has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 36.2% for current year. The Zacks Consensus Estimate for the current year has improved by 2.6% over the last 30 days.

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