Renewed vigor of the economy has aided the major bourses bounce back from their worst two-day start to a year since 2000. The labor market added jobs at a good clip in December and dismissed fears of major slowdown for the U.S. economy. Let us, thus, look at stocks that can make the most of the blockbuster jobs report and scale north.
Here’s Proof the Labor Market is on Fire
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 312,000 new jobs in December, exceeding analysts’ estimates of around 182,000. The surge in hiring was the biggest in 10 months, underscoring the fact that the American economy remains robust despite recent market turbulence. By the way, this also marked the second-highest number of job additions during any month of the Trump administration.
(Source: Bureau of Labor Statistics)
Employers added 2.6 million jobs in 2018, more than 2.2 million added in 2017. Hiring in October and November were also way more than earlier reported, with 58,000 new jobs added to the 2018 total. Such a feat was achieved despite questions about employers’ ability to find skilled labor and headwinds associated with slowdown in cyclical part of the economy, including housing.
The jobless rate, in the meantime, ticked up to 3.9% from 3.7%. However, it still continues to languish at historically low levels. The real unemployment rate, including those who are underemployed and discouraged, also known as the U6 rate, went up slightly to 7.6%, but that’s still well below the 9.3% level when President Trump took office.
(Source: Bureau of Labor Statistics)
More Jobs Lure People In to Labor Force: Staffing to Shine
Such a strong month of hiring has resulted in the labor force participation rate to increase to 63.1%, matching the highest level reached since September 2013. This surely bodes well for staffing companies. Additionally, the Conference Board’s Employment Trends Index was 110.41 in November. Compared with the year-ago level, the index shows a jump of 4.4%.
In fact, Gad Levanon, chief economist, North America, at the Conference Board had said that “at least through the middle of December (when the employment numbers were collected), there were no signs that employers are slowing down at all.”
Manufacturing Notched Biggest Annual Job Gain in 20 Years
Healthcare and education did witness the best month-over-month net change in job gains in December, but it was the manufacturing sector that experienced significant hiring in December with an additional 32,000 jobs. The manufacturing sector, in fact, registered net job gains of 284,000 in 2018, capping its best calendar year since 1997. Dr. Chad Moutray, chief economist at the National Association of Manufacturers added that “manufacturers are bringing people back into the workforce, and we need this trend to continue.”
(Source: Bureau of Labor Statistics)
Blue-collar durable goods manufacturing including fabricated metals and computer and electronic products, in particular, saw most number of job additions, per the Labor Department. Such a hiring spree indicated that those who are into the manufacturing of durable goods items are in an expansion mode and their businesses are churning out huge profits.
Post-Recession High Wage Growth to Boost Discretionary Spending
The phenomenal jobs report also shows that hourly pay went up 0.4% to $27.48 last month. In the last 12 months, wages rose to 3.2% from 3.1%, matching a post-recession high set earlier in the year.
Courtesy of record wage growth, the consumer discretionary sector is, thus, poised to benefit significantly. After all, higher wage growth plays a significant role in driving consumer discretionary spending. Needless to say, among the economic factors that primarily impacts demand for consumer discretionary goods is wage growth. If wages keep rising, consumers generally have more discretionary income to spend. In contrast, if wages fall or remain stagnant, demand for such goods decline.
Top 5 Winners
From recruiters and manufacturers to consumer discretionary players, 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 carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Korn/Ferry International KFY provides talent management solutions worldwide. The company currently has a Zacks Rank of 2. The Zacks Consensus Estimate for current year earnings increased 1.8% in the past 60 days. The stocks estimated earnings growth rate for the current quarter and year are 15.7% and 23.5%, respectively.
BG Staffing, Inc. BGSF provides temporary staffing services in the United States. The company currently has a Zacks Rank of 2. The Zacks Consensus Estimate for current year earnings increased 4.3% in the past 90 days. The stocks estimated earnings growth rate for the current quarter and year are 44.4% and 68.3%, respectively.
CUI Global, Inc. CUI engages in the acquisition, development, and commercialization of power and electromechanical components. The company currently has a Zacks Rank of 2. The Zacks Consensus Estimate for current year earnings soared 39% in the past 90 days. The stocks estimated earnings growth rate for the current quarter and year are 14.3% and 146.2%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
DXP Enterprises, Inc. DXPE engages in distributing maintenance, repair, and operating (MRO) products, equipment, and services to energy and industrial customers in the United States. The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for current year earnings surged 11.3% in the past 60 days. The stocks estimated earnings growth rate for the current quarter and year are 37.9% and 33.5%, respectively.
G-III Apparel Group, Ltd. GIII designs, manufactures, and markets women's and men's apparel in the United States and internationally. The compan, currently flaunts a Zacks Rank of 1. The Zacks Consensus Estimate for current year earnings advanced 5.8% in the past 60 days. The stocks estimated earnings growth rate for the current quarter and year are 69.2% and 71.9%, respectively.
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