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Solid US Labor Market Puts Focus on 3 Sector ETFs & Stocks

Sanghamitra Saha
CoreCivic, Inc. (CXW) has been struggling lately, but the selling pressure may be coming to an end soon.

U.S. employers added 263,000 new jobs in April, after 189,000 gains in March, 56,000 in February and 312,000 in January. The latest number breezed past market expectations of 185,000. The unemployment unexpectedly fell to a fresh 49-year low of 3.6%. Wall Street had expected a 3.8% jobless rate.

Though the figure was encouraging, investors should note that it was because 500,000 Americans left the labor force, which include both people working and looking for jobs. Then again, Midwest snowstorms were likely to lower job gains by about 20,000, Goldman Sachs estimated. Absent this headwind, the U.S. economy would have come up with a more stellar jobs data.

In April, average hourly earnings increased 6 cents to $27.77. In a year, average hourly earnings have grown by 3.2%, short of projections. Average hourly earnings of private-sector production and nonsupervisory employees rose 7 cents to $23.31 in April.

However, tepid wage gains give cues of softer inflation, which in turn should keep the Fed dovish for a few more days. If this happens, the stock market will continue to be charged up.

Winning Sector ETFs

Against this backdrop, investors should bet on ETFs that are the biggest beneficiaries of the April jobs data report. Below we have highlighted some of those that will likely see smooth trading in the days ahead.

Construction

About 33,000 jobs were created in the construction sector in the month. In the last 12 months, the sector generated about 256,000 jobs. Gains were palpable in nonresidential specialty trade contractors (+22,000) and in heavy and civil engineering construction (+10,000) (see all industrial ETFs here).

Obviously, such positive data makes us keep a close watch on Invesco Dynamic Building & Construction ETF PKB. The underlying index of the fund picks building and construction stocks on the basis of factors like growth, stock valuation and investment timeliness. Though the fund currently has a Zacks Rank #4 (Sell), it can see some bounce post the release of the April jobs data.

EMCOR Group Inc. EME, with a Zacks Rank #1 (Strong Buy), provides electrical and mechanical construction, and facilities services in the United States. The stock has a VGM Score of A.

Health Care

Jobs in the health care sector grew by 27,000 in the month, wherein ambulatory health care services and hospitals added a respective 17,000 and 8,000. Per tradingeconomics, health care employment increased by 404,000 in a year’s time.

This trend puts the spotlight on First Trust Health Care AlphaDEX Fund FXH. The fund has considerable exposure to Health Care Providers & Services and Health Care Equipment & Supplies. Biotechnology also has substantial focus on this Zacks Rank #2 fund (read: 4 Sector ETFs That Crushed S&P 500 in Decade-Old Bull Run).

Investors should also place their bet on HCA Healthcare Inc. HCA, a Zacks Rank #2 non-governmental hospital in the United States providing health care and related services. It comes from a top-ranked Zacks industry (top 42%) and top-ranked Zacks sector (top 13%).

Real Estate

In March, employment in financial services industry rose by 12,000. The industry added 110,000 jobs over the past 12 months. About three-fourths of the growth came from real estate and rental and leasing.

Vanguard Real Estate ETF (VNQ) may see some solid trading in the near term after the jobs report. The fund currently has a Zacks Rank #3 (Hold). Zacks Rank #2 Prologis Inc. (PLD) can also be tapped by investors (read: Top ETF Picks for Your IRA).

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EMCOR Group, Inc. (EME) : Free Stock Analysis Report
 
First Trust Health Care AlphaDEX Fund (FXH): ETF Research Reports
 
Vanguard Real Estate ETF (VNQ): ETF Research Reports
 
Invesco Dynamic Building & Construction ETF (PKB): ETF Research Reports
 
HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report
 
Prologis, Inc. (PLD) : Free Stock Analysis Report
 
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