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Sector ETFs to Win After Robust October Jobs Data

Sanghamitra Saha

In October, U.S. employers added 128,000 new jobs, after an upwardly revised 180,000 gains in September. The latest number beat market expectations of 89,000. After revisions, job gains averaged 38,000 per month over the last three months.

In October, average hourly earnings increased by 6 cents to $28.18. In a year, average hourly earnings grew 3%. Average hourly earnings of private-sector production and nonsupervisory employees rose 4 cents to $23.70 in October. The U.S. unemployment rate remained at 3.6%, the lowest in 50 years.

The report is a huge hit given a 40-day General Motors (GM) strike, which sent 46,000 autoworkers out of the workforce and was expected to be a huge setback for the job market. However, a strike activity at GM plants in Michigan and Kentucky caused manufacturing employment fall the maximum in a decade.

Health Care

Per trading economics, health care added 15,000 jobs in the month. Per tradingeconomics, health care employment increased by 402,000 in a year’s time. This is one of the sectors which have been adding jobs continuously.

The fund iShares U.S. Healthcare Providers ETF IHF should thus benefit. The index of the fund looks to track stocks of health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes, etc. The Zacks Rank #3 (Hold) stock added about 8% on Nov 1.

Food Services and Drinking Places

About 48,000 jobs were created in the sector in the month. Job growth in the industry has averaged 38,000 over the past three months, compared with an average monthly gain of 16,000 in the first seven months of 2019.

Obviously, such positive data makes us keep a close watch on Invesco Dynamic Food & Beverage ETF PBJ. The underlying index of the fund includes food and beverage companies. These companies are principally engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of food technologies. The fund has a Zacks ETF Rank #3.

Financial Activities

In October, employment in financial activities grew 16,000, with notable gains in real estate and rental and leasing (+10,000) and in credit intermediation and related activities (+6,000). Financial activities added 108,000 jobs over the last 12 months.

Since the real estate sector contributed to job growth meaningfully, investors can take a look at Real Estate Select Sector SPDR Fund XLRE. The underlying Real Estate Select Sector Index includes securities of companies from the following industries real estate management and development and REITs, excluding mortgage REITs (read: 10 Top-Ranked ETFs Beating S&P 500 This Year).

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Invesco Dynamic Food & Beverage ETF (PBJ): ETF Research Reports
iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
Real Estate Select Sector SPDR Fund (XLRE): ETF Research Reports
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