Staffing service providers have been witnessing a solid run on the bourse for the past year. Substantial surge in manufacturing and service activities, aided by a recovering economy, has fueled the industry’s growth.
While hiring rose for IT, e-commerce, logistics and healthcare through the pandemic, the beaten down sectors, such as accommodation, food services, transportation and entertainment, are also gathering steam.
Notably, the Zacks Staffing industry appreciated 60% over the past year compared with the S&P 500 Index’s 34.5% rally and 0.8% decline of the broader Zacks Business Services sector.
Economic Recovery, Manufacturing and Service Strength Spurring Recruitment
The staffing industry is a major beneficiary of manufacturing and service activities, which, in turn, are dependent on the economic health. Notably, a steady economic recovery is evident from the latest first-quarter 2021 GDP number, which according to the "second" estimate released by the Bureau of Economic Analysis, increased at an annual rate of 6.4% compared with the 4.3% increase in the fourth quarter of 2020.
Economic activity in the manufacturing sector expanded 0.5% from April to May, as the Manufacturing PMI measured by Institute for Supply Management (ISM) touched 61.2%, clocking the 12th consecutive month of expansion. Non-manufacturing activities clocked 1.3% growth from April to May, as the Services PMI measured by ISM touched the all-time high of 64% and registered the 12th consecutive month of expansion.
Payrolls, Job Openings, Jobless Claims Signaling Strength
Non-farm payroll in May reported by the U.S. Bureau of Labor Statistics (BLS) was up 559,000, with majority of employment generation coming from leisure and hospitality, public and private education, and in health care and social assistance. The unemployment rate shrunk 0.3% to 5.8% and average hourly earnings rose by 15 cents to $30.33.
Per the Labor Department data released on Jun 3, weekly unemployment claims for the week ended May 29 dropped by 20,000 to 385,000, lower than consensus estimate of 391,000. This is the eighth straight week of decline and the lowest since Mar 14, 2020, when the coronavirus crisis just started.
Moreover, just 77,439 applications were filed in the week for jobless claims through the federal relief program, lower than the previous week’s 94,999. The figures are inspiring given that the pandemic is yet not over.
On Jun 8, the Labor Department's monthly Job Openings and Labor Turnover Survey (JOLTS) report revealed that job openings jumped 998,000 to a record high of 9.3 million as of Apr 30, the highest in the history of this data series that commenced in December 2000.
Top Picks
Given the backdrop, it would be prudent to invest in staffing stocks that have strong growth potential for 2021. We have selected four such stocks for you.
Heidrick & Struggles International Inc. HSII: This executive search and consulting services provider sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has an expected earnings growth rate of 71.8% for 2021. The Zacks Consensus Estimate for current-year earnings has moved up 38.2% over the last 60 days. The stock has gained 55.4%, year to date.
TrueBlue Inc. TBI: This provider of specialized workforce solutions also flaunts a Zacks Rank #1. The company has an expected earnings growth rate of more than 100% for 2021. The Zacks Consensus Estimate for ongoing-year earnings has moved 40.4% north in the last 60 days. The stock has appreciated 53.6%, year to date.
Robert Half International Inc (NYSE:RHI). RHI: The staffing and risk consulting services provider carries a Zacks Rank #2 (Buy). The company has an estimated earnings growth rate of 54.1% for the current year. The Zacks Consensus Estimate for 2021 earnings has been revised 22% upward in 60 days’ time. The stock has jumped 46.2% year to date.
ManpowerGroup (NYSE:MAN) Inc. MAN: This workforce solutions and services provider also carries a Zacks Rank #2. The company has a projected earnings growth rate of 70.6% for the current year. The Zacks Consensus Estimate for current-year earnings has moved up 14% over the last 60 days. The stock has appreciated 32.1%, year to date.
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ManpowerGroup Inc. (MAN): Free Stock Analysis Report
Heidrick & Struggles International, Inc. (HSII): Free Stock Analysis Report
Robert Half International Inc. (RHI): Free Stock Analysis Report
TrueBlue, Inc. (TBI): Free Stock Analysis Report
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