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Employment Stocks to Rise?

By Selena Maranjian – Updated Nov 16, 2016 at 5:10PM

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As the economy recovers, temporary staffing firms may enjoy a boost.

A certain group of stocks has been doing rather well lately, at least stock price-wise. Manpower (NYSE:MAN), for example, has seen its shares jump more than 60% in the past year, and they're currently near a 52-week high. The company's recently announced first-quarter earnings were double those of last year (partly due to an acquisition). Adecco (NYSE:ADO) shares, after plunging when the firm delayed reporting its 2003 numbers, have been moving back up smartly. And Kforce (NASDAQ:KFRC) shares have roughly tripled over the past year. (The company is acquiring Hall, Kinion & Associates (NASDAQ:HAKI).) Also flirting with 52-week highs have been Robert Half (NYSE:RHI), Labor Ready (NYSE:LRW), and CDI (NYSE:CDI). What's up?

Well, these companies are in the employment-services industry. They get called when other companies need warm bodies to do various tasks. The fact that they've been on a roll suggests that the job outlook in our great nation may be improving. Of course, to some degree, the price surges can also be explained simply by ungrounded investor enthusiasm and hopefulness, more than by concrete evidence of strong job growth.

What is the current job growth situation in our economy? Well, it's somewhat mixed, but there's reason to be hopeful. According to the Labor Department, there were many more jobs created in March than had been expected -- 308,000, to be roughly precise. As a counterpoint, a CBS MarketWatch article noted, "The average number of new claims for state unemployment benefits over the past four weeks rose by 2,250 to a seven-week high of 347,000." Still, a Reuters story reports that per Challenger, Gray & Christmas, corporate "planned job cuts fell in March to the lowest level in nine months." Some sort of recovery does seem to be at work.

Employment-services firms, many of which offer temporary employees ("temps") to companies, stand to benefit even as permanent jobs are created, because companies will often hire temps for a while as business heats back up. The upside for these firms is that they can delay having to begin paying for benefits for full-fledged employees -- at least, until they're more confident about their industry's recovery.

It's not too late to invest in many of these firms, but do your homework first. As well as you can, determine which ones have the strongest competitive positions, the least debt, the most cash, the fastest growth rates, the most straight-talking management, the most reasonable valuations, and the most potential for further growth. Discuss these companies or see what others are saying about them on our discussion boards -- we're offering a free 30-day trial of our boards right now.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.

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Stocks Mentioned

Robert Half International Inc. Stock Quote
Robert Half International Inc.
RHI
$73.63 (0.66%) $0.48
ManpowerGroup Inc. Stock Quote
ManpowerGroup Inc.
MAN
$65.34 (-3.14%) $-2.12
Kforce Inc. Stock Quote
Kforce Inc.
KFRC
$57.99 (-1.91%) $-1.13
CDI Corp. Stock Quote
CDI Corp.
CDI

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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