Profit From Strong Job Additions With These 5 Top-Ranked Picks
Job additions continued to be substantial in June, indicating that hiring remains robust even as the economy nears full employment. However, the unemployment rate inched up. But this was due to an increase in the labor force participation rate with several individuals looking to rejoin the workforce. The only worrying sign was the sluggish pace of wage growth, which came in below expectations.
June’s jobs report indicates that corporations are successfully filling up open positions even as the pool of skilled workers continues to shrink. Professional and business services led job gains, followed by manufacturing, healthcare and construction. With job gains likely to continue in the coming months, picking stocks from these sectors looks like a prudent option at this point.
Rise in Labor Force Participation Boost Unemployment
Though job additions remained robust in June, the unemployment rate increased from an 18-year low of 3.8% to 4%. However, the increase in the unemployment rate was largely attributable to a rise in the labor force participation rate.
This metric increased by 0.2 percentage points to 62.9% even as 601,000 individuals chose to rejoin the labor force. The increase in labor force participation is particularly notable, since it comes after three consecutive monthly declines.
Meanwhile, average hourly earnings increased by 0.2%, or 5 cents to $26.98 an hour. Consequently, the yearly increase in wages remained unchanged at 2.7% in June. One factor impeding the growth in wages was a fall in full-time positions by 89,000.
Professional Services, Manufacturing, Healthcare Lead Gains
The economy added 213,000 jobs in June, exceeding the consensus estimate of 196,000.Economists had predicted that gains would decline to around half this number as the economy nears full employment. Notably, monthly job additions have averaged 200,000 over the past one year. Job additions for April and May were revised upward by a combined 37,000.
At the forefront of job gains were manufacturing, healthcare and construction, which added 36,000, 25,000 and 13,000 jobs, respectively. However, leading the pack was professional and business services with 50,000 new jobs. The sector has added 521,000 jobs in the past 12 months.
Our Choices
Job additions in June remained robust despite economists claiming that they would slow as the economy nears full employment. Though the unemployment rate increased, this was largely attributable to an increase in the labor participation rate. As individuals choose to rejoin the workforce, corporations will find it easier to fill up positions even as the skilled labor pool continues to shrink.
Professional and business services, manufacturing, healthcare and construction have been the highest recruiters according to the June jobs report. Adding stocks from these sectors looks like a smart choice at this point. 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 VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Korn/Ferry International KFY is the world's leading and largest executive recruitment firm with the broadest global presence in the executive recruitment industry.
Korn/Ferry’s projected growth rate for the current year is 18.4%. The Zacks Consensus Estimate for the current year has improved 5.5% over the last 30 days.
Avis Budget Group, Inc. CAR provides vehicle rental services through a network of approximately 10,000 car and truck rental locations.
Avis Budget Group’s projected growth rate for the current year is 24.4%.
Regal Beloit Corporation RBC is a leading manufacturer of electrical and mechanical motion control products.
Regal Beloit’s projected growth rate for the current year is 20.8%. The Zacks Consensus Estimate for the current year has improved 0.9% over the last 60 days.
Amedisys Inc. AMED provides home health and hospice services throughout the United States to the growing chronic, co-morbid, and aging American population.
Amedisys’ projected growth rate for the current year is 41.5%. The Zacks Consensus Estimate for the current year has improved 0.4% over the last 30 days.
Jacobs Engineering Group Inc. JEC is one of the leading providers of professional, technical and construction services to industrial, commercial and governmental clients.
Jacobs Engineering Group’s projected growth rate for the current year is 31.5%. The Zacks Consensus Estimate for the current year has improved 0.1% over the last 30 days.
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Avis Budget Group, Inc. (CAR) : Free Stock Analysis Report
Jacobs Engineering Group Inc. (JEC) : Free Stock Analysis Report
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Korn/Ferry International (KFY) : Free Stock Analysis Report
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