Unemployment Steady at 17-Year Low: 5 Top-Ranked Picks

In March, job additions dropped to their lowest level in six months, according to fresh data from the Department of Labor. However, the unemployment rate remained flat at a 17-year low even as wage gains inched higher. Also, job additions for February were revised upward and the broad trends for the sector remained encouraging.

While healthcare and manufacturing contributed significantly to job additions, professional and business services led gains. There is additional evidence to support the view that the sector is likely to experience strong gains in the near future. Picking stocks from this sector is definitely a prudent option at this point.

Wage Gains Inch Higher, Unemployment Flat

The economy added only 103,000 jobs in March, significantly lower than the consensus estimate of 189,000. However, job additions for February were revised upward from 313,000 to 326,000. Also, the economy experienced job additions at an average pace of 202,000 per month during the first quarter. This was significantly faster than the average gains registered over the last two years.

Meanwhile, U6, the most rigorous metric of unemployment in the U.S. economy, declined to 8%, its lowest level in 11 years. This measure takes into account individuals who are not searching for employment or those who are working part-time since they cannot secure full-time employment.

Average hourly earnings increased by 8 cents to $26.82. However, the metric registered only a 2.7% year-over-year increase, marginally higher than the 2.6% pace witnessed in February. Moreover, the unemployment rate remained flat at 4.1% for the sixth consecutive month. Unseasonal weather prevented unemployment from falling further, though it remains at a 17-year low.

Professional and Business Services Lead Gains

At the forefront of jobs gains were healthcare and construction. Each of these sectors added 22,000 jobs. Job additions in mining amounted to 9,000. However, leading the pack was the professional and business services sector which added 63,000 jobs. Over the year, the sector has added 502,000 jobs.

This is another indication of the growing importance of the services sector in the economy. Earlier this month the ISM Services Index expanded for the 98th consecutive month. Meanwhile, economic growth remains strong which is a major positive for the sector. Earnings prospects are also bright with total Q1 earnings expected to be up 10.5% from the year-earlier level on 4.8% higher revenues as of Apr 6, 2018. (Read: Bank Earnings Finally Taking Off)

Our Choices

Even though job additions for March remained low, the overall employment situation remains strong. In fact, the slowdown in the pace of hiring gives credence to the view that the economy is near full employment. Additionally, earnings growth continued to inch higher and unemployment remained unchanged at a record low. 

Professional and business services have been the biggest gainer according to the March jobs report. Adding stocks from this sector 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 a good VGM score. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vectrus, Inc. VEC engages in providing infrastructure asset management, logistics and supply chain management, and information technology and network communication services.

Vectrus has a VGM Score of A. The company’s projected growth rate for the current year is 37.8%.The Zacks Consensus Estimate for the current year has improved by 27.2% over the last 60 days.

Limbach Holdings, Inc. LMB is a provider of commercial specialty contractor services.

Limbach Holdings a VGM Score of A. The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 12.8% over the last 30 days.

NV5 Global, Inc. NVEE offers professional, technical consulting and certification solutions for public and private sector organizations.

NV5 Global has a VGM Score of B. The company’s projected growth rate for the current year is 29%. The Zacks Consensus Estimate for the current year has improved by 12.9% over the last 30 days.

CRA International Inc. CRAI provides legal, regulatory, business consulting and other expert services through its specialized consultants across the globe.

CRA International has a VGM Score of B. The company’s expected earnings growth for the current year is 12.6%. The Zacks Consensus Estimate for the current year has improved by 19.4% over the last 60 days.

FTI Consulting Inc. FCN provides specialized consulting services across 26 foreign countries with a total headcount of more than 4,200 employees.

FTI Consulting has a VGM Score of B. The company has expected earnings growth of 8.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 14% over the last 60 days.

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