The year is off to a sizzling start for job creation. Employers added almost half a million jobs in the first two months of 2017, the best back-to-back performance since last summer. Not only were workers hired at a robust pace, unemployment came down and wages scaled higher. The number of people losing jobs is also at its lowest since 1973.
Staffing companies stand to gain as the labor market strengthens, while President Donald Trump’s campaign promises, including a job-boosting tax or infrastructure program, is likely to reverse a decade-long decline in factory jobs.
Payroll Shows Solid Gains
U.S. employers added 235,000 new jobs in February within the first full month of Trump’s win, steering past expectations of 191,000. Payroll gains were driven by construction and manufacturing, while wage growth picked up as the labor market continued its steady improvement, indicating a resilient economy.
Employment in weather-sensitive industries got a big boost from the second warmest February on record. Construction jobs, which can fluctuate depending on the weather, increased by 58,000 and marked the biggest rise since the recovery that began in mid-2009. Manufacturing payrolls gained 28,000, matching the most since Aug 2013. Health care providers also added a large number of jobs as did white-collar firms and educational organizations.
Job additions were, in fact, broad-based with the lone exception of retailers. They shed 26,000 jobs, the highest in four years. Nevertheless, robust February jobs data followed a 238,000 increase in January, the best back-to-back performance since July.
Private Sector Adds Jobs
Private employment, in the meantime, rose by 227,000 in February after 221,000 added in the prior month, according to the Labor Department.
Automatic Data Processing (ADP), however, reported that employment in the private sector rose by 298,000 in February, with goods producers adding 106,000. Construction and manufacturing positions, mining as well as natural resources contributed significantly. January job additions were, in fact, revised upward from 246,000 to 261,000. Nonetheless, both the agencies reported healthy private sector job additions.
Unemployment Rate Dips, Wages Improve
The unemployment rate fell to 4.7% in February from 4.8% in January as more people entered the labor force in search of work, while fewer gave up searching for jobs. The U6 unemployment rate was 9.2% last month, down from 9.4% in the prior month. U6 is the broadest measure of unemployment and underemployment as it not only includes the total unemployed number but also the discouraged workers, the marginally attached as well as part-time workers.
Wages for American workers, in the meanwhile, went up 0.2% in February to $26.09 an hour. And the average annual rate of growth for hourly employee earnings was 2.8% in the month, up from 2.6% in January.
Trump Plans to Bring Back Millions of Jobs
Trump seized the opportunity to flaunt his success in the first federal jobs report. He praised the efforts of manufacturing executives and powerful business leaders to generate jobs in the U.S. and pledged to bring back jobs that corporate America has outsourced for cheap labor.
In his first month as the President, Trump urged many top executives to hire in the U.S., while he promised to roll out favorable proposals, including a plan to overhaul the tax code and increase infrastructure spending. These measures will eventually help companies create jobs. He also touched on his plans of deporting illegal immigrants to Mexico, while Secretary of State Rex Tillerson is already in Mexico on what Trump described as a “tough trip”.
The U.S. has lost more than five million manufacturing jobs since 2000, mostly due to lower wages, automation and foreign competition. Many companies try to trim employment costs by moving to places where workers are paid a lot less than in the U.S. Trump added that a lot of manufacturing jobs were lost since the U.S. joined the North American Free Trade Agreement in 1994, while around 70,000 factories were shut down since China tied up the World Trade Organization almost 16 years ago.
4 Best Staffing Picks for Your Portfolio
The latest numbers bode well for staffing companies. In fact, jobless claims, a proxy of layoffs, remained below the key threshold of 300,000 for about 105 straight weeks.
Meanwhile, Trump had met a few chief executives of the country’s biggest manufacturers and pledged to return jobs to millions in the U.S.
The buoyancy in the staffing space is also confirmed by its solid Zacks Industry Rank in the top 38%, indicating continued hiring and more job opportunities. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
We have, thus, selected four staffing stocks that boast a Zacks Rank #1 (Strong Buy) and are well positioned to grow in the near term. Such stocks also flaunt a VGM score of ‘A’. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Heidrick & Struggles International, Inc. (HSII) provides executive search, culture shaping and leadership consulting services. The company enables its clients to build leadership teams by facilitating the recruitment, management and deployment of senior executives. The Zacks Consensus Estimate for its current year earnings surged 5.4% over the last 60 days.
The company has given a stable return of 1.7% on a year-to-date basis. The company’s expected growth rate for this year is 13.1%, higher than the Staffing Firms industry’s gain of 8.4%.
Kforce Inc. (KFRC) is engaged in providing professional and technical specialty staffing services and solutions. The Zacks Consensus Estimate for its current year earnings rose 7.4% over the last 60 days.
The company has given a solid return of 4.8% on a year-to-date basis. The company’s expected growth rate for this year is 27.2%, more than the industry’s addition.
Randstad Holding NV (RANJY) is a staffing and recruitment company that provides solutions in the field of flexible work and human resources (HR) services. The Zacks Consensus Estimate for its current year earnings jumped 12.3% over the last 60 days.
The company has given a stellar return of 9.7% on a year-to-date basis. The company’s expected growth rate for this year is 13.4%, higher the industry’s mark.
Hays plc (HAYPY) is a specialist recruitment group that operates in 33 countries, including the U.S. The Zacks Consensus Estimate for its current year earnings climbed 6.5% over the last 60 days.
The company has given an encouraging return of 5.6% on a year-to-date basis. The company’s expected growth rate for next year is 13.5%, more than the industry’s increase of 13.4%.
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