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5 Top Business Services Stocks to Buy as Job Gains Rebound

Swarup Gupta

In March, job additions recovered significantly from a slump encountered in the preceding month. Hiring breezed past estimates, allaying fears that an economic slump was in the works. While some areas of weakness were clearly visible, healthcare and professional and technical services emerged as the leading recruiters.

With the year’s sluggish start behind us, investors can now focus on the positive aspects of the U.S. economy. Expansion is indeed taking place at a slower rate and the pace of hiring has also declined.

But wages continue to rise even as unemployment remains flat at a record low. Investing in business services stocks, among the top hiring sectors in March, looks prudent now.

Hiring Recovers, Unemployment Flat at 50-Year Low

The U.S. economy added 196,000 jobs in March, easily exceeding the consensus estimate of 184,000. February’s dismal hiring numbers were revised upward from 20,000 to 33,000. January’s job gains were also revised marginally upward to 312,000. These revisions took the first quarter’s average job gains to a solid 180,000.

The rebound in hiring ensured that the unemployment rate for March was unchanged at a 50-year low of 3.8%. The U6 unemployment rate, which includes people forced into part-time work and those only sporadically looking for jobs, also remained flat at 7.3%. This represents a marginal decline from the year-ago level of 7.9%.

Meanwhile, average hourly earnings increased 4 cents to $27.70. The year-over-year increase in earnings declined from 3.4% to 3.2%. But even then, wages continue to increase at their fastest pace in a decade.

A large swathe of economists thinks yearly wage gains will hit 4% in the near term. This clearly serves to illustrate how tight hiring conditions are at the moment.

Healthcare, White-Collar Firms Lead Hiring

March’s gains were largely broad-based. Food services and drinking places added 27,000 jobs, in keeping with their average gains over the past 12 months. Employment in construction remained flat at 16,000.

However, the sector has added 246,000 jobs over the past 12 months. In February, builders were forced to reduce hiring by the most in 18 months due to extremely cold weather.

Healthcare, and professional and technical services led jobs gains. Employment in healthcare increased by 49,000 jobs in March and nearly 400,000 in the past 12 months. Professional and technical services added 34,000 jobs last month. The sector has created 311,000 jobs over the past 12 months.

Last month, employment in computer systems design and related services increased by 12,000. Management and technical consulting services and architectural and engineering services added 6,000 jobs each.

Our Choices

March’s jobs report will go a long way in restoring confidence in the U.S. economy. Retail sales and housing data weighed on consumer sentiment recently, though the former metric has registered a revival. Economic conditions look favorable once again and are likely to be aided by the Fed’s dovish stance.

This is why it makes good sense to add business services stocks to your portfolio. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and good VGM Score. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clean Harbors, Inc. CLH is a leading provider of environmental, energy and industrial services in North America.

Clean Harbors has a VGM Score of A. The company’s expected earnings growth for the current year is 32.3%. The Zacks Consensus Estimate for the current year has improved by 8.7% over the last 60 days. 

Charles River Associates CRAI provides legal, regulatory, business consulting and other expert services through its specialized consultants across the globe.

Charles River Associates has a VGM Score of A. The Zacks Consensus Estimate for the current year has improved by 4.7% over the last 60 days. 

Heidrick & Struggles International, Inc. HSII is a provider of executive search and consulting services on a global basis.

Heidrick & Struggles has a VGM Score of A. The company’s projected growth rate for the current year is 3%.The Zacks Consensus Estimate for the current year has improved by 6.6% over the last 60 days. 

TriNet Group, Inc. TNET is a provider of a comprehensive human resources solution for small to medium-sized businesses.

TriNet has a VGM Score of B. The company’s projected growth rate for the current year is 12.3%. The Zacks Consensus Estimate for the current year has improved by 9.4% over the last 60 days.   

Deluxe Corporation DLX through its industry-leading businesses and brands, helps financial institutions and small businesses better manage, promote and grow their businesses.

Deluxe has a VGM Score of B.

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Charles River Associates (CRAI) : Free Stock Analysis Report
 
Heidrick & Struggles International, Inc. (HSII) : Free Stock Analysis Report
 
TriNet Group, Inc. (TNET) : Free Stock Analysis Report
 
Clean Harbors, Inc. (CLH) : Free Stock Analysis Report
 
Deluxe Corporation (DLX) : Free Stock Analysis Report
 
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