In September, the unemployment rate declined to its lowest level in nearly 49 years. However, job additions came in significantly below expectations, even though the broader employment picture remained robust. Further, even though September’s numbers missed targets, the figures for July and August were revised upward. Also, the labor force participation rate remained unchanged.

Meanwhile, the pace of wage growth declined year over year. However, the metric is widely expected to exceed 3% as firms compete to hire an ever smaller pool of workers. Once again, professional and business services led job gains. This is why it makes sense to add stocks from this domain to your portfolio.

Unemployment Lowest Since 1969

Though job additions for September came in under most expectations, the unemployment rate declined from 3.9% to 3.7%. This is the lowest level registered since December 1969 and lower than the estimated rate of 3.8%. The U6 unemployment rate, that includes people forced into part-time work and people only sporadically looking for jobs, also inched up from 7.4% to 7.5%.

However, this is still a considerably low level. More significantly, the decline in unemployment was not due to a contract in the labor pool. The civilian labor force expanded by 150,000. Additionally, the labor force participation rate remained unchanged at 62.7%. But the number of individuals who aren’t considered part of the labor force did rise by 74,000 to around 96.4 million.

Professional and Business Services Lead Gains

The economy added 134,000 jobs in September, significantly lower than the consensus estimate of 183,000. This is the smallest number of job additions over the last 12 months. Most economists attributed last month’s sub-par job gains to the impact of Hurricane Florence. This was visible in the decline of leisure and hospitality jobs, which shrunk by 17,000. 

But job additions for July and August were revised upward by a combined 87,000. While July’s job additions were increased from 147,000 to 165,000, August’s gains were revised upward to 270,000 from 201,000. Notably, monthly job additions have averaged 201,000 over the past one year and 190,000 over the last three months.

At the forefront of job gains were healthcare, construction, manufacturing and transportation and warehousing, which added 26,000, 23,000, 18,000 and 24,000 jobs, respectively. However, the largest contributor to job additions was professional and business services with 54,000 new jobs. The sector has added 560,000 jobs in the last 12 months.

Our Choices

Despite the decline in job additions during the month of September, the overall labor market picture remains solid. The unemployment rate is now hovering at record-low levels even as labor force participation remains unchanged. Further, job gains for the last two months have been revised significantly upward.

As has been the case for several months now, professional and business services provided the highest number of job additions. 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. 

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 23.6%. The Zacks Consensus Estimate for the current year has improved by 13.2% over the last 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 B. The company’s projected growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 1.8% over the last 30 days. 

General Finance Corporation (GFN - Free Report) provides mobile storage, liquid containment and modular space solutions.

General Finance has a VGM Score of B. The company’s projected growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by more than 100% over the last 30 days.

CPI Card Group Inc. (PMTS - Free Report) designs, produces, packages and engages in fulfillment and data personalization of financial payment cards.

CPI Card Group has a VGM Score of B. The company’s expected earnings growth for the current year is 10%.

Conduent Incorporated (CNDT - Free Report) is a business process services company. It engages in providing business and government services to citizens, patients, customers, and employees.

Conduent has a VGM Score of B. The company’s projected growth rate for the current year is 33.8%.