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Weekly Jobless Claims Lowest Since November 1969: 5 Picks

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The Labor Department’s weekly jobless claims data for the week ended Jan 19 provides fresh evidence that the labor market remains robust. In fact, the metric dropped to its lowest level in more than 49 years. The U.S. labor market is a picture of health at the moment fueled by strong job additions and record-low unemployment.

December witnessed significant job additions, indicating that hiring remains robust even as the economy nears full employment. In 2018, 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 Decline

On Jan 24, the Department of Labor reported that weekly jobless claims decreased 13,000 to a seasonally adjusted 199,000 (below the threshold 200,000 level) for the week ended Jan 19. The figure was better than the consensus estimate of 217,000 and was the lowest level experienced since mid-November 1969. Moreover, initial claims for the week ended Jan 12 was revised downward by 1,000 to 212,000 from 213,000.

The four-week moving average of initial claims dropped 5,500 to 215,000 for the week ended Jan 19. This metric is considered a better measure of labor market trends as it eliminates weekly fluctuations. Additionally, the number of people receiving benefits after an initial week of aid decreased 24,000 to 1.71 million for the week ended Jan 12. However, the four-week moving average of continuing claims increased 1,250 to 1.73 million.

Labor Market Remains Robust

On Jan 4, the Department of Labor reported non-farm job additions for the month of December 2018 were 312,000, the highest level since February 2018. The figure was also higher than the consensus estimate of 183,000. Moreover, November’s job additions were revised to 176,000 from 155,000 and October’s job addition increased to 274,000 from 237,000.

Unemployment rate increased slightly from 3.7% to 3.9% owing to 419,000 new workers entering the workforce and the labor force participation rate increasing to 63.1%. Labor force participation rate was up 0.2% sequentially and 0.4% year over year. For 2018, as a whole, total job additions came in at 2.6 million, highest since 2015.

Moreover, wage rate increased 0.4% in December, higher than the consensus estimate of 0.3%. Wage rate advanced 3.2% year over year in December. The average work week rose 0.1 hour to 34.5 hours.

Professional & Business Services Leads Job Gains

According to the latest report (Jan 4, 2019) of the Department of Labor, the professional and business services sector added 583,000 jobs in 2018, the highest amongst all the sectors. Healthcare was the second largest recruiter with 346,000 jobs additions. Meanwhile, manufacturing and construction sectors also recruited heavily with 284,000 and 280,000 additions in 2018, respectively.

Our Top Picks

Solid macro-economic fundamentals, government’s tax reform along with 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.

We have narrowed down our search to five stocks, each of which has either a Zacks Rank #1 (Strong Buy) or 2 (Buy). 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 past one year.

DXP Enterprises Inc. (DXPE - Free Report) is a leading products and service distributor that adds value and total cost savings solutions to industrial customers in the United States, Canada, Mexico and Dubai. It sports a Zacks Rank #1.The company has expected earnings growth of 33.5% for current year. The Zacks Consensus Estimate for the current year has improved by 6.7% over the last 60 days.

Resources Connection Inc. (RECN - Free Report) is a multinational professional services firm that helps business leaders execute internal initiatives. It sports a Zacks Rank #1. The company has expected earnings growth of 2% for current year. The Zacks Consensus Estimate for the current year has improved by 14.9% over the last 60 days.

Addus HomeCare Corp. (ADUS - Free Report) provides personal care services to elderly, chronically ill, disabled persons, and individuals who are at risk of hospitalization or institutionalization in the United States. It flaunts a Zacks Rank #1.The company has expected earnings growth of 24.8% for current year. The Zacks Consensus Estimate for the current year has improved by 2.6% over the last 60 days.

Korn Ferry (KFY - Free Report) is the world's largest executive recruitment firm with the broadest global presence in the executive recruitment industry. It has a Zacks Rank #2. The company has expected earnings growth of 23.5% for current year. The Zacks Consensus Estimate for the current year has improved by 1.8% over the last 60 days.

Catasys Inc. (CATS - Free Report) provides specialized behavioral health management services to health plans, employers and unions. It has a Zacks Rank #2. The company has expected earnings growth of 53.3% for current year. The Zacks Consensus Estimate for the current year has improved by 27.9% over the last 60 days.

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