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Our Top Pick for a Recovering Job Market

We think one hidden gem could give investors a sweet payday.

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The employment market has improved greatly over the last two quarters. Nonfarm job growth has been positive for five out of the last six months. This marks a dramatic turnaround from the 400,000 average monthly losses witnessed in 2009. We believe April 2010's employment report reaffirms the stabilizing trend for the labor market. However, we do not expect a "V" shaped recovery by any means. Our expectation for the employment market is for a slow pace of improvement throughout most of 2010, and an elevated unemployment rate for an extended period.

So how does an investor play this dynamic? As the employment market has stabilized, many of the names on our employment services coverage list have rallied during the last few quarters. Many firms that we thought were undervalued during the worst of the recession now appear fairly valued to us. Nevertheless, there is one firm we believe is highly undervalued, providing an opportunity for investors to capitalize on an improving employment market. Over the next several paragraphs, we recap the state of the employment market from the most recent data, and provide a sense of what is happening "on-the-ground" from the latest earnings results from several of our employment-related firms. Next, we break down the April employment numbers from the government's latest report. Finally, we lift the veil on one name that we believe currently offers a significant opportunity for investors.

Vishnu Lekraj does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.