In what appears to be best described as the lowest level of unemployment in five years, the U.S. Labor Department said yesterday that jobless claims fell 10,000 to a seasonally adjusted level of 332,000.

In simple terms, this indicates fewer people are losing their jobs and hiring is on the rise in the U.S. The U.S. unemployment rate, which started 2013 below 8%, fell further in February to 7.7%, marking a four-year low. This upbeat scenario directly affects recruiting solutions providers such as Kelly Services, Inc. (NASDAQ:KELYA), Trueblue Inc (NYSE:TBI), and Kforce Inc. (NASDAQ:KFRC).

These stocks have already appreciated in recent months but it would be a fallacy to assume the gains will be limited to current levels.  Here is a closer look:

Staffing Service Providers

Kelly Services, Inc. (NASDAQ:KELYA) is best known as a specialized player in providing professional and technical employees in the fields of education, legal, health care, and creative services. This staffing firm has been moving up steadily since early December but still trades below the book value of $19.9. The stock has gained 24 percent over the quarter but continues to trade above the key moving averages, which indicates the rally is likely to go on for some more time. Although the 1 percent dividend yield is not very attractive, it nevertheless reinforces the fact that the company has returned to profits. At a forward price earnings multiple of less than 11.5 and with near zero debt on the balance sheet, the stock looks attractively priced.

Washington based Trueblue Inc (NYSE:TBI) specializes in temporary blue-collar staffing services. This stock has managed nearly 50 percent return over the last three months. More importantly, the rally has been uninterrupted except for some technical corrections. On an annual level, the gains are moderate at 23 percent. However, the stock appears to have moved ahead of fundamentals as a look at the most recent full year reveals that its top line and profits grew 5.5 percent and 9.2 percent respectively only. Considering this, the gains over the last 12 months appear to be on a higher side although this analysis will be greatly challenged when it integrates recently acquired MDT Personnel in its books. For the immediate future, the stock has already reached its price target of $21.5 by Deutsche Bank AG (NYSE:DB) (ETR:DBK) and thus, may be ripe for a correction now. But over the longer time frame, it may resume its uptrend.

Kforce Inc. (NASDAQ:KFRC) is another staffing player which has offered exceptional returns to investors in the last year. This high beta stock has accumulated more than 22 percent gains over the previous quarter even as the company reported lower revenues and profits in the December quarter. The results were better than street’s expectations as the company demonstrated better margins during the period. As the hiring process in the U.S. is not expected to go away in a hurry, the rally will most likely continue albeit at a moderate rate. This was evident in the company’s revenue guidance for the current quarter which stands in the range of $268 million to $274 million. Kforce said earnings per share (EPS) for the quarter will be in the range of $0.09-$0.12. Analysts tracking Kforce were expecting more from the company.

Overall, the recovery in staffing firms is likely to continue although a lot of the gains are purely based on expectations of improved operational performance in future. As the rally so far indicates that a correction is ruled out, investors may not get opportunity to enter at lower levels; however, investors can consider buying these stocks during a consolidation.