The U.S. weekly unemployment benefit claims have declined steadily in the last six weeks as reported by the Department of Labor. This clearly shows that the labor market is heading for stabilization despite April's disappointing nonfarm payrolls.

The labor market, which was the best-performing segment of the U.S. economy before the outbreak of coronavirus, suffered the most during the pandemic. Although most of the segments of the economy are showing signs of recovery, the labor market is yet to recover from the impacts of lockdowns.

However, weekly jobless claims data are showing that U.S. businesses are recruiting more lately. This situation bodes well for the staffing firms. Investment in such stocks with a favorable Zacks Rank would boost one's portfolio in the near term.

Signs of Systematic Recovery

On May 20, the Department of Labor reported that weekly jobless claims declined to 444,000 for the week ended May 15 from 478,000 recorded in the previous week. The consensus estimate was 458,000. The data was the lowest since the week ended Mar 14, 2020. Notably, initial claims were hovering around 200,000 in the pre-pandemic period.

Last reported week,  a mere 95,086 applications were filed for jobless claims through the federal relief program. This figure was more than 1 million at its pandemic peak. However, continuing claims (for those who already received benefits) rose 111,000 to a seasonally adjusted 3.75 million, for the week ended May 8.

As of May 1, around 16 million Americans were reportedly receiving benefits from eight separate state and federal programs, dropping a significant 900,000. Notably, receivers of unemployment benefits topped more than 30 million at the pandemic high.

Momentum Likely to Continue

The U.S. economy is witnessing an impressive recovery since the beginning of 2021, faster-than-expected by a large number of market participants. The vaccination drive on a priority basis and an unprecedented stimulus helped the economy to ramp up the level of activities.

On May 11, the Labor Department's monthly Job Openings and Labor Turnover Survey (JOLTS) report revealed that job openings jumped 597,000 to 8.1 million at Mar 31, the highest in the history of this data series that commenced in December 2000.

However, the economy added just 266,000 jobs in April significantly below the consensus estimate of 1.035 million. The shortage of skilled laborers is the primary reason for this huge disappointment.

Irrespective of their size — large, mid, or small — U.S. businesses are unable to fill open jobs and are raising both wage rate and other benefits to attract skilled laborers. The average hourly wage rate increased 0.7% in April compared with a 0.1% drop in March.

Some financial experts blamed the $1,400 direct check payment to Americans and a $300 weekly supplement extended up to early September as part of Biden's $1.9 fiscal stimulus as reasons for skilled laborers to avoid the job market.

Several news agencies have reported that 22 states are mulling to stop offering a $300 weekly federal benefit in June in order to force around 3.6 million Americans to join the labor force. All these benefits will likely benefit staffing firms immensely as higher recruitment will increase their scope of business resulting in higher profits.

Our Top Picks

We have narrowed down our search to six staffing stocks that have provided double-digit return year to date. These stocks have strong growth potential for 2021 and have seen positive earnings estimate revisions in the last 30 to 60 days.

Moreover,  most of these companies are regular dividend payers providing an important income stream during the market's downturn. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). 

The chart below shows the price performance of our six picks year to date.

Heidrick & Struggles International Inc. (HSII Quick Quote HSII - Free Report) provides executive search and consulting services to businesses and business leaders worldwide. It enables clients to build leadership teams by facilitating the recruitment, management, and development of senior executives.

This Zacks Rank #1 company has an expected earnings growth rate of 71.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 38.2% over the last 30 days. The stock price has a dividend yield of 1.45% and climbed 39.6% year to date.

TrueBlue Inc. (TBI Quick Quote TBI - Free Report) provides specialized workforce solutions in the United States, Canada, and Puerto Rico. It operates through three segments: PeopleReady, PeopleManagement, and PeopleScout.

This Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 17.4% over the last 30 days. The stock price has appreciated 38% year to date.

Robert Half International Inc. (RHI Quick Quote RHI - Free Report) provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. It operates through three segments: Temporary and Consultant Staffing, Permanent Placement Staffing, and Risk Consulting, and Internal Audit Services.

This Zacks Rank #2 company has an expected earnings growth rate of 51.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 19.9% over the last 30 days. The stock price has a dividend yield of 1.73% and soared 40.4% year to date.

Kforce Inc. (KFRC Quick Quote KFRC - Free Report) is a full-service, web-based specialty staffing firm providing flexible and permanent staffing solutions in the United States. It operates through the Technology and Finance and Accounting segments.

This Zacks Rank #2 company has an expected earnings growth rate of 15.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.7% over the last 30 days. The stock price has a dividend yield of 1.54% and jumped 40.2% year to date.

ManpowerGroup Inc. (MAN Quick Quote MAN - Free Report) is one of the leading providers of innovative workforce solutions and services across in the Americas, Southern Europe, Northern Europe, and the Asia Pacific Middle East region.

This Zacks Rank #2 company has an expected earnings growth rate of 67.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.2% over the last 30 days. The stock price has a dividend yield of 1.96% and advanced 32.2% year to date.

Resources Connection Inc. (RGP Quick Quote RGP - Free Report) is a professional services firm under the Resources Global Professionals name that helps business leaders execute internal initiatives in North America, Europe, and the Asia Pacific.

This Zacks Rank #2 company has an expected earnings growth rate of 60% for next fiscal year (ending May 2022). The Zacks Consensus Estimate for next-year earnings has improved 1.1% over the last 60 days. The stock price has a dividend yield of 3.92% and surged 14.5% year to date.