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4 Sector ETFs & Stocks to Buy on Record Jobs Gain in May
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The U.S. jobs report for the month of May reflected the largest one-month job gains, showing signs of a V-shaped recovery from the coronavirus-led slump. The U.S. economy unexpectedly added 2.5 million jobs in May, the highest on record, breezing past economists’ expectations of job losses of 8 million, and after the largest drop ever of 20.7 million in April.
Overall, the unemployment rate was 13.3% in the month of May, down by 1.4 percentage points. However, the unemployment rate came in lower than market expectation of 19.5%. Reflecting the impact of the coronavirus pandemic and its counter measure, the unemployment rate and the number of unemployed persons are still up by 9.8 percentage points and 15.2 million, respectively, since February.
Average hourly earnings for all employees on private nonfarm payrolls dropped by 29 cents to $29.75, following a rise of $1.35 in April. Average hourly earnings of private-sector production and nonsupervisory employees declined by 14 cents to $25.00 in May.
“It appears that businesses began rehiring workers earlier and in greater numbers than expected, a trend that is likely to continue as lockdowns ease around the country,” said Eric Winograd, senior economist at AllianceBernstein, as quoted on CNBC. If the momentum sustains, we too believe along with many other analysts that the second half of the year should be robust.
Winning Sector ETFs
Against this backdrop, investors should bet on ETFs and stocks that are the largest beneficiaries of the May jobs data. Below we have highlighted some of these that will likely see smooth trading in the days ahead.
Leisure and Hospitality
Employment in leisure and hospitality gained by 1.2 million. Food services and drinking places (+1.4 million) was the most beneficial industry. It marked almost half of the total job increase last month. In contrast, employment in the accommodation industry dropped in May (-148,000) and has declined by 1.1 million since February (see all Consumer Discretionary ETFs here).
Invesco Dynamic Leisure And Entertainment ETF (PEJ - Free Report) – The underlying Dynamic Leisure & Entertainment Intellidex Index comprises stocks of U.S. leisure and entertainment companies.
Cracker Barrel Old Country Store Inc. (CBRL - Free Report) – The Zacks Rank # 2 (Buy) company is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit.
Construction
Construction employment increased by 464,000, recouping almost half of April's decline (-995,000). Much of the gain occurred in specialty trade contractors (+325,000), with growth equally split between the residential and nonresidential components. Job gains were also noticed in construction of buildings (+105,000), mainly residential.
iShares U.S. Home Construction ETF (ITB - Free Report) – It measures the performance of the home construction sector of the U.S. equity market. The fund has a Zacks Rank #3 (Hold).
KB Home (KBH - Free Report) – The Zacks Rank #2 company is a well-known homebuilder in the United States. The company’s Homebuilding operations include building and designing homes that cater to first time, move-up and active adult homebuyers on acquired or developed lands.
Health Care
Jobs in the health care sector grew by 312,000 in the month, with gains in offices of dentists (+245,000), offices of other health practitioners (+73,000) and offices of physicians (+51,000) grabbing the spotlight.
Health Care Select Sector SPDR Fund (XLV - Free Report) – The underlying Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology. The fund has a Zacks Rank #2 (read: Play Sector ETFs With Strong Beat Ratios).
West Pharmaceutical Services Inc. (WST - Free Report) – The Zacks Rank #1 company is a designer and manufacturer of injectable pharmaceutical packaging and delivery systems.
Retail
In April, retail employment gained by 368,000, following a loss of 2.3 million in April. Notable job gains occurred in clothing and clothing accessories stores (+95,000), automobile dealers (+85,000) and general merchandise stores (+84,000).
VanEck Vectors Retail ETF (RTH - Free Report) – The underlying MVIS US Listed Retail 25 Index of the fund tracks the overall performance of companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. The fund has a Zacks Rank #2 (read: 5 Sector ETFs Just Got Upgraded to Buy).
Sportsmans Warehouse Holdings, Inc. (SPWH - Free Report) – The Zacks Rank #2 outdoor sporting goods retailer offers camping products, fishing products, and hunting and shooting products.
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4 Sector ETFs & Stocks to Buy on Record Jobs Gain in May
The U.S. jobs report for the month of May reflected the largest one-month job gains, showing signs of a V-shaped recovery from the coronavirus-led slump. The U.S. economy unexpectedly added 2.5 million jobs in May, the highest on record, breezing past economists’ expectations of job losses of 8 million, and after the largest drop ever of 20.7 million in April.
Overall, the unemployment rate was 13.3% in the month of May, down by 1.4 percentage points. However, the unemployment rate came in lower than market expectation of 19.5%. Reflecting the impact of the coronavirus pandemic and its counter measure, the unemployment rate and the number of unemployed persons are still up by 9.8 percentage points and 15.2 million, respectively, since February.
Average hourly earnings for all employees on private nonfarm payrolls dropped by 29 cents to $29.75, following a rise of $1.35 in April. Average hourly earnings of private-sector production and nonsupervisory employees declined by 14 cents to $25.00 in May.
“It appears that businesses began rehiring workers earlier and in greater numbers than expected, a trend that is likely to continue as lockdowns ease around the country,” said Eric Winograd, senior economist at AllianceBernstein, as quoted on CNBC. If the momentum sustains, we too believe along with many other analysts that the second half of the year should be robust.
Winning Sector ETFs
Against this backdrop, investors should bet on ETFs and stocks that are the largest beneficiaries of the May jobs data. Below we have highlighted some of these that will likely see smooth trading in the days ahead.
Leisure and Hospitality
Employment in leisure and hospitality gained by 1.2 million. Food services and drinking places (+1.4 million) was the most beneficial industry. It marked almost half of the total job increase last month. In contrast, employment in the accommodation industry dropped in May (-148,000) and has declined by 1.1 million since February (see all Consumer Discretionary ETFs here).
Invesco Dynamic Leisure And Entertainment ETF (PEJ - Free Report) – The underlying Dynamic Leisure & Entertainment Intellidex Index comprises stocks of U.S. leisure and entertainment companies.
Cracker Barrel Old Country Store Inc. (CBRL - Free Report) – The Zacks Rank # 2 (Buy) company is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit.
Construction
Construction employment increased by 464,000, recouping almost half of April's decline (-995,000). Much of the gain occurred in specialty trade contractors (+325,000), with growth equally split between the residential and nonresidential components. Job gains were also noticed in construction of buildings (+105,000), mainly residential.
iShares U.S. Home Construction ETF (ITB - Free Report) – It measures the performance of the home construction sector of the U.S. equity market. The fund has a Zacks Rank #3 (Hold).
KB Home (KBH - Free Report) – The Zacks Rank #2 company is a well-known homebuilder in the United States. The company’s Homebuilding operations include building and designing homes that cater to first time, move-up and active adult homebuyers on acquired or developed lands.
Health Care
Jobs in the health care sector grew by 312,000 in the month, with gains in offices of dentists (+245,000), offices of other health practitioners (+73,000) and offices of physicians (+51,000) grabbing the spotlight.
Health Care Select Sector SPDR Fund (XLV - Free Report) – The underlying Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology. The fund has a Zacks Rank #2 (read: Play Sector ETFs With Strong Beat Ratios).
West Pharmaceutical Services Inc. (WST - Free Report) – The Zacks Rank #1 company is a designer and manufacturer of injectable pharmaceutical packaging and delivery systems.
Retail
In April, retail employment gained by 368,000, following a loss of 2.3 million in April. Notable job gains occurred in clothing and clothing accessories stores (+95,000), automobile dealers (+85,000) and general merchandise stores (+84,000).
VanEck Vectors Retail ETF (RTH - Free Report) – The underlying MVIS US Listed Retail 25 Index of the fund tracks the overall performance of companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. The fund has a Zacks Rank #2 (read: 5 Sector ETFs Just Got Upgraded to Buy).
Sportsmans Warehouse Holdings, Inc. (SPWH - Free Report) – The Zacks Rank #2 outdoor sporting goods retailer offers camping products, fishing products, and hunting and shooting products.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>