Weekly Jobless Claims Lowest in Nearly 50 Years: 5 Top Picks

The Labor Department’s jobless claims data for the week ended Apr 6 provides fresh evidence that the labor market is still robust. In fact, the metric dropped to its lowest level in nearly 50 years. The U.S. labor market is a picture of health at the moment fueled by strong job additions and record-low unemployment.

March 2019 witnessed significant job additions, indicating that hiring remains robust even as the economy nears full employment. The U.S. labor market is the major driver of the bull run, which is more than a decade old. Boyed by a robust labor market, Wall Street is still raging forward withstanding intermittent volatilities and fluctuations.

Jobless Claims Continue to Decline

On Apr 11, the Department of Labor reported that weekly jobless claims decreased 8,000 to a seasonally adjusted 196,000 (below the threshold 200,000 level) on Apr 4. The figure was better than the consensus estimate of 212,000 and the lowest experienced since October 1969.

The four-week moving average of initial claims dropped by 7,000 to 207,000 for the week ended Apr 6, the lowest level since early December 1969. This metric is considered a better measure of labor market trends as it eliminates weekly fluctuations.

Additionally, the number of people receiving benefits after an initial week of aid decreased by 13,000 to 1.71 million for the week ended Mar 31. Furthermore, the four-week moving average of continuing claims decreased 11,000 to 1.73 million.

Labor Market Remains Robust

On Apr 5, the Department of Labor reported non-farm job additions of 196,000 for the month of March, signifying 102th straight month of non-farm payroll growth. The figure was also higher than the consensus estimate of 184,000.

Moreover, February’s job additions were revised to 33,000 from 20,000. February’s job market was affected by partial shutdown of the U.S. government that continued for a record-setting 35 days. Meanwhile, January's job gains were also revised marginally upward to 312,000. These revisions took the first quarter's average job gains to a solid 180,000.

The unemployment rate remained at a 50-year low of 3.8%. The real unemployment rate (including people forced into part-time work and those only sporadically looking for jobs) also remained flat at 7.3%. This indicates a strong decline from the year-ago level of 7.9%.

Job data for March also revealed that average wage rate increased 0.14%, below the consensus estimate of 0.2%. The wage rate increased 3.2% year over year, below the consensus estimate of 3.4%. Lower unemployment along with lower wage growth has eliminated inflationary expectations which will enable the Fed to stick to its stand of not raising interest rate in 2019.

Health Care Services Lead Job Gains

According to the latest report (Apr 5, 2019) of the Department of Labor, the health care sector added 49,000 jobs in March, the highest amongst all the sectors. The professional and technical services was the second-largest recruiter with 34,000 jobs additions. Meanwhile, the restaurant and construction sectors also recruited heavily with 27,000 and 16,000 additions in March, respectively.

Our Top Picks

The momentum of the U.S. labor market is likely to continue in the future. Consequently, adding stocks from sectors that recruited the most in the recent past should prove to be lucrative. We have narrowed down our search to five stocks, each of which has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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