5 Business Services Stocks To Defy Slump In Job Gains

February’s job additions, which came in well below expectations, sparked fresh concerns that the U.S. economy is slowing. More alarmingly, job gains recorded were the lowest in 17 months. At the same time, the slowdown needs to be taken with a pinch of salt. This is because seasonal fluctuations need to be taken into consideration.

Job gains for most industries remained largely flat, except construction, which experienced significant job losses. But standing tall was health, and professional and business services.

Incidentally, professional and business services have contributed the highest number of jobs in the past 12 months. This is why it makes sense to add stocks from this domain to your portfolio.

Smallest Job Additions in 17 Months

The U.S. economy added merely 20,000 jobs in February, well below the consensus estimate of 186,000 jobs. This, in itself, is far less than January’s upwardly revised figure of 311,000. Further, this is the lowest number of jobs that the U.S. economy has added since September 2017.

To put things in perspective, the economy has been adding an average number of 200,000 jobs over the past year. So despite February’s slump, the rate of hiring remains firm enough to push unemployment lower.

This was visible in February when the unemployment rate declined from 4% to 3.8%. The primary reason for this is that government workers rejoined the workforce at the end of the partial government shutdown.

Business Services Contributes Maximum Jobs

Construction was a major casualty of such a weak report, recording 31,000 job losses during the month. This partially negates the addition of 53,000 jobs in January. Heavy and civil engineering construction lost 13,000 jobs. Wholesale trade contributed 11,000 jobs, while manufacturing added a paltry 4,000.

Job additions for the other major industries such as leisure and hospitality, retail trade, mining, transportation and warehousing remained largely flat. Healthcare was one of the few industries to make a major contribution, adding 21,000 jobs.

But leading the pack once again in February was professional and business services with 42,000 job additions. This is more or less in keeping with its average monthly contribution over the past 12 months. This implies that the industry is still the leader as far as job gains over the past year are concerned.

Our Choices

According to most economists, one poor jobs report should not be a cause for concern. Of course, fears of an economic slowdown could flare up. But it pays to keep in mind that unexpected fluctuations are par for the course since the cessation of the government shutdown.

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

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Written By: Zacks Investment Research