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Labor Market Shows Signs of Systematic Recovery: 6 Top Picks

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The nonfarm payroll data for the first two months of 2021 has shown that the U.S. labor market is systematically heading toward stabilization. The labor market, which was the best-performing segment of the U.S. economy before the outbreak of coronavirus, suffered the most during the pandemic. Although most of the segments of the economy are showing signs of recovery albeit at a slow pace, the labor market is still in jeopardy.

Nevertheless, nationwide deployment of COVID-19 vaccines, significant reduction in new coronavirus cases and expectations of a fresh round of large fiscal stimulus are the immediate drivers of the labor market.

Better-Than-Expected Jobs Data

The Department of Labor reported that nonfarm payroll additions in February jumped to 379,000 compared with the consensus estimate of 193,000. January's job additions were revised upward from 49,000 to 166,000. This shows that in the first two months of 2021, the U.S. economy added 545,000 jobs. However, 8.5 million fewer U.S. citizens had jobs in February comparing year over year.

The unemployment rate in February fell to 6.2% from 6.3% in January. The consensus estimate was 6.4%. This was a significant reduction from the pandemic-era high of 14.8% recorded in April 2020. Additionally, average hours of work per week were 34.6 in February compared with 34.9 in January. The average wage rate grew by 0.2% compared with a downwardly revised 0.1% in the previous month. The consensus estimate was an increase of 0.2%.

Near-Term Catalysts

First, the U.S. government has ramped up COVID-19 vaccinations. CNBC reported that on Mar 7, Jeff Zients, the White House coronavirus response coordinator, said, "the nation is now administering more than 2 million shots a day on average, compared to 900,000 daily injections on average during the early days of the vaccination campaign."

The speeding up of the vaccination process implies chances of faster-than-expected reopening of the U.S. economy. This will benefit those cyclical companies that are still fully or partially inoperative due to COVID-19 related restrictions. This is evident from February's jobs data.

The leisure and hospitality sector added 355,000 jobs, the highest in February 2021. This includes 286,000 in bars and restaurants, 36,000 in hotel-related jobs and 33,000 in amusement, gambling and recreational businesses.

Second, on Mar 4, the Senate passed a $1.9 trillion coronavirus relief package proposed by President Joe Biden in mid-January. The House of Representatives, where the Democrats hold the majority, is likely to pass the bill on Mar 9 and send it to Biden for his signature before a Mar 14 deadline to renew unemployment aid programs.

President Biden's proposal includes $15 billion in grants to small businesses, along with $35 billion in low-interest loans. The Small Business Paycheck Protection Program of $284 billion in loans will also continue. Notably, small businesses create a significant number of jobs in the U.S. economy. More than 50% of the newly created jobs in the private sector originate here.

Our Top Picks

At this stage, it will be prudent to invest in stocks with a favorable Zacks Rank that are likely to benefit as the labor market stabilizes. We have narrowed down our search to six such stocks that have strong growth potential for 2021 and have witnessed solid earnings estimate revisions in the last seven to 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our six picks year to date.

Malibu Boats Inc. MBUU operates as a designer, manufacturer and marketer of sport boats primarily in the United States.

This Zacks Rank #1 company has an expected earnings growth rate of 69.3% for the current year (ending June 2021). The Zacks Consensus Estimate for current-year earnings has improved 11.2% over the last 30 days.

Pool Corp. POOL is the world's largest wholesale distributor of swimming pool supplies, equipment and related products. In addition, it is a leading regional wholesale distributor of irrigation and landscape products.

This Zacks Rank #2 company has an expected earnings growth rate of 11.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 7 days.

Camping World Holdings Inc. CWH is a provider of services, protection plans, products and resources for recreational vehicle enthusiasts. It operates through three segments: Consumer Services and Plans, Dealership and Retail.

This Zacks Rank #2 company has an expected earnings growth rate of 20.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.1% over the last 7 days.

Jack in the Box Inc. JACK is a restaurant company that operates and franchises through Jack in the Box quick-service restaurants, and is one of the nation’s largest hamburger chains.

This Zacks Rank #2 company has an expected earnings growth rate of 37.2% for the current year (ending September 2021). The Zacks Consensus Estimate for current-year earnings has improved 13.9% over the last 30 days.

Korn Ferry KFY is the world's leading and largest executive recruitment firm with the broadest global presence in this industry. It operates through four segments: Consulting, Digital, Executive Search, and Recruitment Process Outsourcing & Professional Search.

This Zacks Rank #1 company has an expected earnings growth rate of 47.1% for next year (ending April 2022). The Zacks Consensus Estimate for next-year earnings has improved 48% over the last 30 days.

Kforce Inc. KFRC is a full-service, web-based specialty staffing firm providing flexible and permanent staffing solutions for organizations. It operates through Technology, and Finance and Accounting segments.

This Zacks Rank #2 company has an expected earnings growth rate of 8.4% for the current year . The Zacks Consensus Estimate for current-year earnings has improved 7.2% over the last 30 days.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>


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Jack In The Box Inc. (JACK) : Free Stock Analysis Report

KornFerry International (KFY) : Free Stock Analysis Report

Pool Corporation (POOL) : Free Stock Analysis Report

Camping World Holdings Inc. (CWH) : Free Stock Analysis Report

Kforce, Inc. (KFRC) : Free Stock Analysis Report

Malibu Boats, Inc. (MBUU) : Free Stock Analysis Report

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