On Sep 6, investors received the most disappointing economic report released recently. Private sector job additions for the month of August came in well below expectations, leading to new questions about the sustainability of the ongoing economic expansion. Most job gains were attributable to a temporary jump caused by the hiring of census workers.
Job gains for the previous months were also revised lower, further accelerating the concerns surrounding the economy. And these fears persist, despite the fact that the growth rate lingers at nearly 2% despite hitting 3% only a year ago. Happily, the services sector remains untouched by recessionary fears. This is why it makes sense to invest in service sector stocks.
Jobs Report Disappoints, Unemployment Steady
In August, the U.S. economy added 130,000 jobs, well below the consensus estimate of 163,000. Even this level of job gains was largely attributable to the temporary recruitment of Census workers, as per data from the Department of Labor. But unemployment remained flat at 3.7%, in line with expectations.
However, the U6 unemployment rate, which includes people forced into part-time work and those only sporadically looking for jobs, increased marginally, from 7% in July to 7.2%. This was primarily due to an increase of 397,000 in the number of individuals working part time due to economic reasons.
Business Services Leads Jobs Gains
Despite the disappointingly low number of job additions, wage growth remained steady, providing some respite to beleaguered investors. Average hourly earnings increased 0.4% during August. The metric also notched up a year-over-year gain of 3.2%. Moreover, both these figures exceeded expectations.
Additionally, labor force participation increased to 63.2%, matching the highest level recorded since August 2013. The separately conducted household survey revealed that the total number of employed Americans increased by 590,000 to touch the unprecedented level of 157.9 million.
Once again, professional and business services led the pack with job gains of 37,000. The federal government came in second, after adding 28,000 workers to the 2020 population census. The healthcare sector added 24,000 jobs while financial services contributed 15,000 additional positions. However, retail trade experienced a loss of more than 11,000 positions.
August’s jobs numbers have added to the worries about the ongoing economic expansion. However, the report is also a reminder of the resilience of the services sector, which is powering economic growth at a time when the manufacturing and farming sectors are fighting a bruising trade war.
This is why investing in service sector stocks remains a prudent choice. 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 good VGM Score. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardtronics plc (CATM - Free Report) provides ATM services primarily in North America and Europe.
Cardtronics has a VGM Score of A. The company’s projected growth rate for the current year is 5.1%. The Zacks Consensus Estimate for the current year has improved by 8.2% over the past 60 days.
Xperi Corporation (XPER - Free Report) is a product and technology licensing company, which manufactures semiconductors and related products.
Xperi has a VGM Score of A. The Zacks Consensus Estimate for the current year has improved by 15.2% over the past 30 days.
CPI Card Group Inc. (PMTS - Free Report) is engaged in financial card production and related services under the VISA, MasterCard, American Express and Discover payment brands.
CPI Card Group has a VGM Score of A. The company’s projected growth rate for the current year is 29.6%. The Zacks Consensus Estimate for the current year has improved by 45.7% over the past 30 days.
Clean Harbors, Inc. (CLH - Free Report) is a leading provider of environmental, energy and industrial services in North America.
Clean Harbors has a VGM Score of A. The company’s projected growth rate for the current year is 53.7%. The Zacks Consensus Estimate for the current year has improved by 6.6% over the past 60 days.
FTI Consulting Inc. (FCN - Free Report) is a global business advisory firm aimed at helping organizations manage change, mitigate risk and resolve financial, legal, operational, political and regulatory, reputational and transactional disputes.
FTI Consulting has a VGM Score of B. The company’s projected growth rate for the current year is 35.4%. The Zacks Consensus Estimate for the current year has improved by 23.5% over the past 60 days.
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