Jobs growth in January smashed estimates, with nonfarm payrolls increasing for the 100th straight month. Hiring boomed despite a partial government shutdown that was the longest in history, dismissing fears of a major slowdown for the U.S. economy. Let us, thus, look at stocks that can make the most of a stellar jobs report and scale north.
Hiring Continues at Blistering Pace
The U.S. economy continues to be one of the world’s most powerful employment generating machines. According to the Bureau of Labor Statistics, the economy added 304,000 new jobs last October, exceeding analysts’ estimates of around 172,000.
December’s job additions, in the meanwhile, were revised down from 312,000 jobs to 222,000, while November’s rose from 176,000 to 196,000. Nonetheless, the average for the last three months is now 241,000 jobs, marking one of the best stretches during an economic expansion dating back nine-and-a-half years ago. By the way, employment gains in 2018 turned out to be the strongest in the last three years.
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(Source: Bureau of Labor Statistics)
The jobless rate, in the meantime, ticked up to 4% from 3.9%. However, it continues to languish at historically low levels. Further, a higher jobless rate was mostly due to the government shutdown, but it had “no discernible impacts” on the uptick in hiring last month, added the Labor Department.
A separate measure of employment that considers discouraged workers and those holding part-time positions for economic reasons went up to 8.1% from 7.6%. But, that’s still well below the 9.3% level when President Trump took office.
Staffing to Shine
Such a strong month of hiring has resulted in the labor force participation rate to increase to 63.1%, the highest in Trump’s era. This surely bodes well for staffing companies. Additionally, the Conference Board’s Employment Trends Index was 111.61 last December, up from 110.23 in November. Compared to the year-ago level, the index shows a jump of 5.4%.
Gad Levanon, Chief Economist, North America, at The Conference Board said that “the Employment Trends Index rose sharply in December, reversing the declines in recent months, suggesting that employment will continue to expand in the coming months.”
The buoyancy in the staffing space is further confirmed by its solid Zacks Industry Rank in the top 19%. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
Leisure and Hospitality Lead the Way in Hiring
By and large, the jobs report showed that most of the industries added jobs and workers’ pay continued to remain consistent over the past few months. Construction firms boosted payrolls by 52,000 and health care providers took on 42,000 workers. Transportation and delivery companies increased staffing by 27,000 and retailers beefed up payrolls by 21,000 following a year when the sector added 26,000 new jobs. Professional and business services too were up 30,000 and manufacturing organizations added 13,000 new jobs, reaching the sector’s 12-month total to 261,000.
However, it was the leisure and hospitality sector that singlehandedly led the way in hiring by boosting employment by 42,000. Such a hiring spree indicated that those who are into the arts and entertainment, hotels and food businesses are in an expansion mode and their businesses are churning out huge profits.
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(Source: Bureau of Labor Statistics)
Top 5 Winners
From recruiters to leisure and hospitality, all stand to gain from a strong jobs report. Thus, investing in such stocks seems the right thing to do now. We have picked five such stocks that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Robert Half International Inc. RHI is the world's first and largest specialized staffing firm. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for current-year earnings has moved up 3.8% in the past 60 days. The stock’s expected earnings growth rate for the current quarter is 20%, in contrast to the industry’s projected decline of 30.2%. The company has outperformed the broader industry in the past year (+16.7% vs -0.3%).
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Resources Connection, Inc. RECN is a multinational professional services firm that helps business leaders execute internal initiatives. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for current-year earnings has moved up 14.9% in the past 60 days. The stock’s expected earnings growth rate for the current quarter is 22.2%, in contrast to the industry’s projected decline of 23.3%. The company has outperformed the broader industry in the past year (+7.7% vs -0.3%).
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Korn Ferry KFY provides talent management solutions worldwide. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for current-year earnings has moved up 1.8% in the past 90 days. The stock’s expected earnings growth rate for the current year is 23.5%, higher than the industry’s growth of 16%. The company has outperformed the broader industry in the past year (+9.8% vs -0.3%). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Darden Restaurants, Inc. DRI owns and operates full-service restaurants in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for current-year earnings has moved up 1.4% in the past 60 days. The stock’s expected earnings growth rate for the current year is 18.3%, higher than the industry’s gain of 8.3%. The company has outperformed the broader industry in the past two years (+45.1% vs +28.8%).
G-III Apparel Group, Ltd. GIII designs, manufactures, and markets women's and men's apparel in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for current-year earnings has moved up 2.2% in the past 60 days. The stock’s expected earnings growth rate for the current year is 71.9%, higher than the industry’s growth of 21.7%. The company has outperformed the broader industry so far this year (+25% vs +15.6%).
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