4 Stocks To Tap Growth Opportunities In The Staffing Market

The U.S. labor market witnessed record-low unemployment level and strong job additions in April. Furthermore, Americans filing for unemployment benefits are below the 300,000 threshold for the 169th consecutive week, the longest streak since 1969.

With job additions staying strong driven by a business-friendly tax reform, staffing companies stand to gain the most.

Record Low Unemployment, Wage Growth Modest

In April, the unemployment rate was down to 3.9%, marking an 18-year low, despite an increase in wage gains.

Meanwhile, U6, the most rigorous metric of unemployment in the United States, declined to 7.8%, its lowest since July 2001. This measure takes into account individuals who are not searching for employment or those who are working part-time since they cannot secure full-time employment.

Although a tighter labor market is leading to better wage growth, it remains below long-run averages. Average hourly earnings in April increased 4 cents to $26.86, registering only a 2.6% year-over-year increase, lower than 2.7% witnessed in March.

Strong Recruitment Trend

The United States added 164,000 jobs in April, significantly higher than 103,000 in March. The average pace of job additions was 202,000 per month during the first quarter, significantly faster than the average gains registered over the last two years. Payrolls were added for 91 straight months, the longest streak since the Labor Department started tracking this data in the 1940s.

While the economy continues to create new jobs in spite of an 18-year low jobless rate, a tight labor market is compelling companies to pay higher to attract and retain employees.

At the forefront of jobs gains last month was professional and business services that added 54,000 jobs. Education and health services added 31,000 jobs. Job additions in manufacturing and construction were 24,000 and 17,000 respectively. Mining added 8,000 jobs.

The labor force participation rate and the employment-to-population ratio were 62.8% and 60.3%, respectively, a marginal change from March.

Growth Expected Through 2018

The labor market remains strong, as it has been during most of the economic expansion that started in mid-2009. Broadly, the Trump administration’s business friendly approach, a strong U.S. economy, reduced tax rates, robust manufacturing and non-manufacturing activity and higher government spending should support additional hiring and wage gains this year.

Per a new industry forecast by Staffing Industry Analysts, U.S. staffing market revenues (includes temporary staffing and place and search) are anticipated to go up by 4% in 2018 to $150 billion. The forecast is an upward revision from the previous expectation of 3% growth. It indicates decent growth considering the fact that the expansion cycle has matured.

Our Choices

Solid macroeconomic fundamentals along with government’s tax reform are the major tailwinds for the U.S. labor market are likely to continue in the near term.

The buoyancy in the staffing space is further confirmed by its solid Zacks Investment Research

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Written By: Zacks Investment Research