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Staffing Industry Holds Promise Despite Lackluster Jobs Data: 4 Choices

There isn't any sugar coating to the Friday's jobs report. Flagging global economy weighed on the US jobs market. However, despite the weakness, most industries added jobs except for manufacturing and energy. Further, it is expected that the pace of hiring will gain traction in the fourth quarter.

While retailers and shippers have begun recruiting for the upcoming holiday season, the healthcare industry is also in desperate need for workers through 2016. Additionally, small and midsized businesses are expected to increase their hiring spree over the next six months. This year more college graduates are also expected to join the workforce compared to previous year, indicating a healthy jobs market.

As more hiring is on the anvil, staffing companies will benefit in the near term. Staffing companies are also expected to experience income growth across all its segments. However, before we pick stocks that are involved in acquiring, deploying and retaining workforce, let us look into how they will perform in the next quarter and beyond.

September: Not As Bad As You Think

According to the Labor Department, the U.S. economy added 142,000 jobs in September, way short of analysts' expectations. Despite this weakness, most industries added jobs, a sign that should encourage staffing companies. Meanwhile, the U6 rate dropped to 10%, indicating that the number of people searching for full time jobs but can't find one, decreased significantly. Job openings had already increased to 5.75 million in July, its highest level in 14 years. Job openings are a leading indicator of hiring.

The U.S. Department of Labor reported that jobless claims' 4-week moving average declined 1,000 to 270,750 in the week ending Sep 26, its lowest level since early August. Additionally, the Automatic Data Processing, Inc. ADP reported that privately-owned companies generated 200,000 jobs in September. Meanwhile, the Conference Board reported those stating jobs are "plentiful" increased to 25.1% in September from 22.1% who said the same in August. The diffusion index also came in at 52.9 in September. Any reading above 50 signifies that hiring is expanding.

Q4 Hiring: Strongest in 8 Years?

Hiring blitz for the final three months of this year is expected to be strongest since the fourth quarter of 2007, according to the Manpower Employment Outlook Survey. On a seasonally adjusted basis, about 18% anticipate increase in staff levels in fourth quarter 2015, gaining by 2 and 3 percentage points from last quarter and year over year, respectively.

Hiring is also expected to be across industries, with all 13 industries carrying a positive outlook for hiring. Employers in industries including Leisure & Hospitality, Wholesale & Retail Trade, Professional & Business Services and Transportation & Utilities reported the strongest hiring intentions.

Broad Based Hiring

Retailers and shippers have already started their hiring spree for the Christmas shopping rush. The retail industry is forecasted to add 755,000 temporary workers during October and November. Companies including Target Corp. TGT , Kohl's Corp. KSS , United Parcel Service, Inc. UPS and FedEx Corp. FDX said they would hire temporary employees extensively during this phase.

Small and midsized business firms are also expected to hire 26% additional full-time employees over the next six months, the most since 2012, according to the PNC Economic Outlook Survey. Additionally, the National Association of Colleges and Employers noted that 60.8% of graduates in 2015 plans to enter the workforce, higher than 59.7% of grads last year.

Meanwhile, as the impact of the Affordable Care Act kicked in, hospital jobs went up by 144,000 this year since Jul 2014, noted Tony Gregoire, director of Research at Staffing Industry Analysts. As a result, the U.S. healthcare staffing revenue is expected to hit a record $12.7 billion in 2015.

4 Staffing Picks

By and large, income for the US staffing industry is expected to rise by 7% in 2015 and by 6% in 2016, which will bring in a record $142.2 billion in profits next year, according to the Staffing Industry Analysts. Further, human resource professionals' confidence on the labor market this year has touched the highest level of optimism since 2009, according to the Society for Human Resource Management.

Banking on this robust uptick in income levels and optimism in the labor market, it will be a prudent idea to invest in staffing companies. We have selected four staffing stocks that are backed by good Zacks Rank.

Cross Country Healthcare, Inc.CCRN is a provider of healthcare staffing services. CCRN holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth above 100% for the current year. In the past two months, the Zacks Consensus Estimate for the current year was revised 17.2% higher.

Team Health Holdings LLCTMH provides professional staffing services to healthcare providers in the U.S. TMH holds a Zacks Rank #2 (Buy) and has expected earnings growth of 17.4% for the current year. Over the past two months, the Zacks Consensus Estimate for the current year was revised up by nearly 0.7%.

Kforce Inc.KFRC provides permanent staffing solutions for organizations. KFRC holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 55.7% for the current year. In the past two months, the Zacks Consensus Estimate for the current year was revised up by 9.4%.

Korn/Ferry InternationalKFY is the world's largest executive recruitment firm. KFY holds a Zacks Rank #2 (Buy) and has expected earnings growth of 8% for the current year. Over the past two months, the Zacks Consensus Estimate for the current year was revised up by nearly 1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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