A new U.S. jobs report contains both good news and bad news for investors…
The strength of contributing 224,000 jobs to the market, which substantially beat analysts’ expectations, is traditionally a good sign for the American economy.
The twist here is that the strong jobs report actually sent markets down, because it decreases the chances that in the short term, the Federal Reserve central bank will rush in and cut interest rates to help prop up the economy.
Investors have been buoyant despite threats of tariff activity that could trigger a new recession, largely because they feel they will get a life preserver from the Fed. The president has gone so far as to criticize the Fed chair, Jerome Powell, for less than a full-throated endorsement of a rate cut.
Now, the Fed seems to indicate that a rate cut is uncertain, partly because with great jobs growth, the economy can’t make the case as well that it needs a shot in the arm.
In any case, the jobs report is good for at least one segment of American industry.
In documenting winners and losers from the U.S. jobs report, Zacks notes employment services in general, and Kelly Services in particular.
Citing expected earnings growth of 7.9% this year, Zacks analysts give Kelly (KELYA) a “buy” ranking, also based on a good P/E ratio.
With price to earnings at 10.21, Kelly is turning heads, and strong jobs numbers create more buzz, as jobs growth directly affects the company’s business model, assumedly in a good way.
Both of these types of gains, and the related hope of future gains, lead to suggestions that Kelly is undervalued at $26. That’s also terrific news for buy and holders — because at the current price, except for a stint at the beginning of 2018, KELYA is already at all-time highs. Anyone who bought in earlier this year, or in 2017, now might see some profit-taking. Buyers who went in prior to that, in 2016, could potentially profit even more, since KELYA spent most of that year in the $15–20 range.
This is why some are keeping Kelly Services on the radar. There’s the potential for both short-term and long-term growth — in an economy where uncertainty abounds.
