William Blair cites tight labor market in staffing stock outlook

Investing.com - William Blair released its Global Services Labor Market Report highlighting mixed employment signals but pointing to an improving backdrop for staffing-related stocks.

The firm reported U.S. job creation slightly below trend, with Bureau of Labor Statistics data showing a decline of 23,000 positions and ADP reporting an increase of 44,000 in July. Education and health services remained the primary contributor to job growth. The unemployment rate dropped 10 basis points to 4.1%, while initial claims and job cuts eased.

The ratio of job openings to hires moderated to 1.38 as openings fell 2% sequentially. The quits rate held steady at 2.0%. Hourly earnings growth decelerated to 3.2% year-over-year. Temporary help returned to slight year-over-year growth for the first time since October 2022 and grew sequentially for the seventh straight month.

William Blair noted in its April upgrade of Kforce (NYSE: KFRC) and Robert Half (NYSE: RHI) that both should benefit from improving demand for U.S. professional staffing, particularly in IT. The firm said Korn Ferry (NYSE: KFY) remains a high-quality franchise name with a strong growth outlook and an attractive sum-of-the-parts valuation.

The firm said shares of First Advantage (NASDAQ: FA) remain attractive despite rising 72% year-to-date versus the S&P 500's 13% gain. William Blair continues to recommend TriNet (NYSE: TNET) given expectations that insurance profitability normalizes over the next several years.

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