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Unemployment Still at 49-Year Low: 5 Business Services Picks

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In November, job additions came in under expectations, leading to fears that economic expansion is losing momentum. Additionally, combined job gains for September and October were revised downward. However, job growth was substantial enough to keep the unemployment rate at its lowest level in 49 years.

Meanwhile, yearly wage gains, a reliable gauge of inflationary pressures, remained unchanged at its highest level since 2009. Jobs gains were led by healthcare, manufacturing and transportation and warehousing.

However, professional and business services have contributed the largest number of jobs over the past year. This is why it makes sense to add stocks from this domain to your portfolio.

Unemployment Flat at 49-Year Low

Though job additions for November failed to live up to expectations, the unemployment rate remained flat at 3.7%, the lowest since December 1969. The level of joblessness has now remained at 3.7% for the third straight month. The number of unemployed persons and the unemployment rate experienced yearly declines of 0.4% and 641,000, respectively.

Meanwhile, the number of employed individuals inched higher, from a record level of 156.6 million to 156.8 million. The number of long-term unemployed persons declined 120,000 to 1.3 million. The metric accounts for 20.8% of all unemployed individuals.

The employment-population ratio remained flat at 60.6%, its highest level since December 2008. Also, the labor force participation rate remained unchanged at 62.9%. Similarly, the number of involuntary part-time workers remained nearly flat at 4.8 million.

Professional and Business Services Post Highest Yearly Gains

The economy added 155,000 jobs in November, lower than the consensus estimate of 198,000. Over the past 12 months, the economy has added 209,000 jobs per month on average. These gains have come despite indications from several quarters that the economy is near full employment.

According to Martha Gimbel of the Indeed Hiring Lab, 155,000 monthly job additions is not a cause for worry. Gimbel believes that the United States is still creating “twice the jobs that the economy needs to add each month to keep the unemployment rate steady.”

At the forefront of job gains were healthcare, manufacturing, retail trade and transportation and warehousing, which added 32,000, 27,000, 18,000 and 25,000 jobs, respectively.

Professional and business services added 32,000 jobs. Notably, the industry has added 561,000 jobs over the past year, the highest among all those covered by the report from the Bureau of Labor Statistics. 

Our Choices

Despite the decline in job additions for November, the economy remains robust even at such a late point in the expansion. This is borne out by the fact that job gains have consistently remained strong enough to keep the unemployment rate flat at a record low.

Overall professional and business services have provided the highest number of job additions over the past 12 months. Adding stocks from this sector looks like a smart choice at this point. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. 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 the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM Score. You can see the complete list of today’s Zacks #1 Rank stocks here.

Information Services Group, Inc. (III - Free Report) is a technology research and advisory company with worldwide operations.

Information Services has a VGM Score of A. The company’s projected growth rate for the current year is 40%.The Zacks Consensus Estimate for the current year has improved by 11.6% over the last 30 days. 

Clean Harbors, Inc. (CLH - Free Report) is a leading provider of environmental, energy and industrial services in North America.

Clean Harbors has a VGM Score of A. The company’s projected growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 17.8% over the last 60 days. 

Xerox Corporation (XRX - Free Report) is a leader in development, manufacture, marketing, servicing and financing of document equipment across the world.

Xerox has a VGM Score of A. The Zacks Consensus Estimate for the current year has improved by 3.6% over the last 60 days. 

Heidrick & Struggles International, Inc. (HSII - Free Report) offers executive search, leadership consulting and culture shaping services on a worldwide basis.

Heidrick & Struggles has a VGM Score of A. The company’s projected growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 18.4% over the last 60 days. 

Insperity, Inc. (NSP - Free Report) is an integrated human resources and business solutions provider.

Insperity has a VGM Score of B. The company’s expected earnings growth for the current year is 51.4%. The Zacks Consensus Estimate for the current year has improved by 5.4% over the last 60 days. 

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