America's Job Market On A Solid Footing: Top 5 Winners
Zacks Investment Research | Apr 11, 2019 10:04PM ET
Declining layoffs on the heels of a rebound in job additions last month is strengthening consumers. Americans also continue to get a raise despite global growth slowdown jitters. Thus, staffing companies stand to gain as the labor market strengthens and stocks of consumer discretionary companies are poised to move north on signs of renewed strength in consumer spending.
Jobless Claims Fall to 50-Year Low
The number of people who applied for unemployment benefits slipped below 200,000 for the first time since 1969. Initial claims, a standard measure of layoffs, fell by 8,000 to 196,000 in the week ending Apr 6. In fact, the four-week moving average that evens out sharp fluctuations in weekly reports declined by 7,000 to 207,000, also the lowest since 1969.
This is a clear sign that the labor market has strengthened in recent times despite a decelerating U.S. economy. After all, the lesser the number of people filing for unemployment benefits, the more Americans have jobs. Needless to say, hiring in the United States picked up last month, with the unemployment rate remaining at record low levels.
Hiring Spree
According to the Bureau of Labor Statistics, the economy added 196,000 new jobs in March, exceeding analysts’ estimates of around 179,000. The job additions in February were also revised up to 33,000 from 20,000. January’s job gains, in the meanwhile, were slightly changed to 312,000.
Nonetheless, hiring sped up by an average of 180,000 in the first three months of this year, marking a solid start. After all, such a feat was achieved despite questions about employers’ ability to find skilled labor.
In the meantime, the jobless rate was at 3.8% last month, slightly above a 49-year low. The real unemployment rate, including those who are underemployed and discouraged, also known as the U6 rate, is down from 7.9% a year ago.
Hiring, in fact, has been broad-based. Both ISM services and manufacturing surveys showed that hiring picked up over the last month. The Non-Manufacturing Employment Index registered 55.9%, an increase of 0.7 percentage point from February’s 55.2%. Similarly, the Manufacturing Employment Index registered 57.5% compared to February’s reading of 52.3%. Both the sub-indices of both gauges continue to remain above the coveted 50 mark for over two years.
Plans for Hiring Outpaces Job Cuts
Based on the JOLTS report, intention to hire has outpaced plans for job cuts in recent times. Currently, the number of open jobs in America is at its highest level at 7.58 million. This assures that demand for employees will stay in the long run.
(Source: Bureau of Labor Statistics)
Moreover, the demand is evident given the rise in wages and benefits, as well as sign-up bonuses intended to lure potential talent. As recently as last month, average workers’ pay check rose 4 cents to $27.70 an hour. The increase in pay may have slowed down to 3.2% from 3.4% in the past 12 months but wages continue to increase at the fastest pace in almost a decade.
5 Stocks to Make the Most of a Healthy Jobs Market
With more number of companies willing to hire, staffing stocks are poised to shine. Additionally, the Conference Board’s Employment Trends Index increased to 111.15 in February, up from downwardly revised 109.34 in January. Compared to the year-ago level, the index shows a jump of 4.3%.
At the same time, rebound in hiring and courtesy of steady wage growth, consumer discretionary companies stand to gain. This is because with jobs in hand and rise in wages, consumers generally have more discretionary income to spend.
We have, thus, selected five stocks from such winning areas that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Heidrick & Struggles International, Inc. (NASDAQ:HSII) provides executive search and consulting services to businesses and business leaders. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 6.6% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 11.9%, in contrast to the Zacks Investment Research
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