In January, U.S. job additions widely exceeded expectations, indicating that the economy retains sufficient steam even after a decade-long expansion. The spurt in jobs gains came despite the recent partial government shutdown. However, the shutdown did cause the employment rate to tick marginally higher.

Job additions for the last two months were also collectively revised downward. However, the three-month average remains above the trend likely at such a late point in economic expansion.

Leisure and hospitality, construction, healthcare, and retail trade led job gains. However, professional and business services have contributed the largest number of jobs over the past year. This is why it makes sense to add stocks from this domain to your portfolio.

Shutdown Raises Unemployment, Wage Gains Inch Higher

Though the recent government shutdown had no discernible impact on job gains, unemployment did inch higher. The rate of joblessness inched up from 3.9% to 4%, a pace it was last at in June 2018. This metric has been moving steadily higher since hitting a 50-year low of 3.7% last fall.  

The Department of Labor said that the shutdown had no material impact on the jump in hiring last month. In fact, government officials said federal workers were employed through the period since they received pay for the second week of January. Federal government employment actually increased by 1,000.

Wage growth remained sluggish, with average hourly earnings increasing 0.1%, coming in below the projected level of 0.3%. However, the year-over-year increase came in at 3.2%, close to the highest levels experienced during the recovery. The Federal Reserve is refraining from aggressive rate hikes since these wage increases haven’t significantly fueled inflation.

Professional and Business Services Post Highest Yearly Gains

The economy added 304,000 jobs in January, significantly higher than the consensus estimate of 154,000. In comparison, the economy added 223,000 jobs per month in 2018 on average, the strongest in three years. These gains have come despite indications from several quarters that the economy is near full employment.

This also marks the 100th straight month of job gains, the longest in history. However, job additions for December were revised significantly lower, from 312,000 to 222,000. November’s gains were revised upward from 176,000 to 196,000. This takes the three-month average to 241,000, marking one of the best periods of job gains during the decade-long expansion.

At the forefront of job, gains were leisure and hospitality, construction, healthcare, and transportation and warehousing, which added 74,000, 52,000, 42,000 and 27,000 jobs, respectively.

Professional and business services added 30,000 jobs. Notably, the industry has added 546,000 jobs over the past 12 months, the highest among all those covered by the report from the Bureau of Labor Statistics. 

Our Choices

The significant improvement in job additions for January indicates that the economy remains robust even at such a late point in the expansion. The recent partial government shutdown did lead to an uptick in the unemployment rate but had little material impact on last month’s job gains.

Overall professional and business services have provided the highest number of job additions over the past 12 months. 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.

Booz Allen Hamilton Holding Corporation (BAH - Free Report) is a provider of management and technology consulting, analytics, engineering, digital solutions, mission operations as well as cyber expertise to the United States and international governments, corporations plus not-for-profit organizations.

Booz Allen Hamilton has a VGM Score of A. The company’s projected growth rate for the current year is 31.7%. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 30 days. 

Resources Connection, Inc. (RECN - Free Report) is a provider of business consulting services worldwide under the Resources Global Professionals brand name.

Resources Connection has a VGM Score of A. The company’s projected growth rate for the current year is 2%. The Zacks Consensus Estimate for the current year has improved by 15.6% over the last 30 days. 

Steelcase Inc. (SCS - Free Report) is a designer and manufacturer of products used to create high-performance work environments.

Steelcase has a VGM Score of A. The company’s expected earnings growth for the current year is 29.7%. The Zacks Consensus Estimate for the current year has improved by 5.4% over the last 60 days. 

WNS (Holdings) Limited (WNS - Free Report) is a business process outsourcing company.

WNS has a VGM Score of B. The company’s projected growth rate for the current year is 18.7%. The Zacks Consensus Estimate for the current year has improved by 6.9% over the last 30 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 B. The Zacks Consensus Estimate for the current year has improved by 17.8% over the last 60 days.