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Record-Low Jobless Claims Show Labor Market Recovery: 5 Picks

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A series of recently released data 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, the labor market is yet to recover from the impacts of lockdowns.

Signs of Systematic Recovery

On Mar 25, the Department of Labor reported that weekly jobless claims declined to 684,000 for the week ended Mar 20 from 781,000 recorded in the previous week. The consensus estimate was 733,000. The data was the lowest since the week ended Mar 14, 2020. Moreover, for the first time, the weekly jobless claims data fell below the pre-pandemic high of 695,000 recorded in 1982.

Continuing claims (for those who already received benefits and reported from a week in arrears of Initial Claims data) also declined, falling 264,000 to 3.87 million. Additionally, the four-week moving average for new claims dropped 13,000 to 736,000.

On Mar 5, 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.

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.

Momentum Likely to Continue

The government has intensified the nationwide deployment of COVID-19 vaccines and the three FDA approved vaccine manufacturers have ramped up production. The possibility of a faster-than-expected reopening of the U.S. economy is likely to bring equilibrium in the labor market.

Several research firms have estimated that U.S. citizens had a staggering $1.5 - $1.8 trillion in savings at the end of 2020 that could climb to $2.4 trillion by mid-2021 due to lockdown-led restrictions. This will enable U.S. consumers to realize their pent-up demand. Higher demand will compel U.S. businesses to increase their scale of operation and recruit more manpower.

Moreover, a fresh round of a massive $1.9 billion fiscal stimulus injected by the Biden administration and Fed chairman Jerome Powell's confirmation of pursuing ultra-dovish monetary policies will strengthen both consumer and business confidence.

Meanwhile, the Department of Commerce reported that U.S. GDP grew 4.3% in fourth-quarter 2020 instead of 4.1% reported earlier. On Mar 17, the Fed has raised its GDP forecast for 2021 to 6.5% from 4.2% in December.

On Mar 10, the Wall Street Journal reported that economists on average expect U.S. GDP to expand nearly 6% this year. On Mar 9, the OECD estimated that the U.S. GDP could increase by 6.5% in 2021. The Oxford Economics predicted 7% U.S. GDP growth in 2021. Higher economic activities will result in higher job creations.

Our Top Picks

At this stage, it will be prudent to invest in staffing stocks as higher recruitment will increase their scope of business resulting in higher profits. We have narrowed down our search to five staffing stocks that have provided double-digit return year to date.

These stocks have strong growth potential for 2021 and have seen positive earnings estimate revisions in the last 30 to 60 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 five picks year to date.

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 12.6% over the last 30 days. The stock price has jumped 40.2% year to date.

Kforce Inc. KFRC provides professional staffing services and solutions in the United States. 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. The stock price has rallied 23.8% year to date.

Cross Country Healthcare Inc. CCRN provides talent management and other consultative services for healthcare clients in the United States. It operates in three segments: Nurse and Allied Staffing, Physician Staffing, and Search.

This Zacks Rank #2 company has an expected earnings growth rate of 45.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 30 days. The stock price has climbed 38.1% year to date.

Heidrick & Struggles International Inc. HSII provides executive search and consulting services to businesses and business leaders worldwide. It enables clients to build leadership teams by facilitating the recruitment, management, and development of senior executives.

This Zacks Rank #2 company has an expected earnings growth rate of 24.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.3% over the last 60 days. The stock price has advanced 19.2% year to date.

TrueBlue Inc. TBI provides specialized workforce solutions in the United States, Canada, and Puerto Rico. It operates through three segments: PeopleReady, PeopleManagement, and PeopleScout.

This Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the last 60 days. The stock price has surged 11.3% year to date.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

KornFerry International (KFY) : Free Stock Analysis Report

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

Heidrick & Struggles International, Inc. (HSII) : Free Stock Analysis Report

TrueBlue, Inc. (TBI) : Free Stock Analysis Report

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