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4 Sector ETFs & Stocks Top Despite Soft December Jobs Data

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The U.S. jobs report for the month of December came in weaker than expected. The December non-farm payroll reading of a cut of 140,000 jobs was well below the estimated 71,000 rise. It marked the first decline in eight months since the job market started to recover in May from a record 20.787 million loss in April.

Overall, the unemployment rate was 6.7% in the month, up from 3.6% recorded in the year-ago period. Average hourly earnings for all employees on private nonfarm payrolls increased 23 cents to $29.81. Subdued wage growth is a concern.

Still, there are some corners in this downbeat job report that are sizzling. As a result, investors should bet on ETFs that are the largest beneficiaries of job gains. Below, we have highlighted some of these that will likely see smooth trading in the days ahead.

Retail

Last month, retail employment grew by 121,000, thanks mainly to a gain of 59,000 in general merchandise stores. Gain in retail positions during the peak of the holiday season, the best-selling period the sector, is understandable. Gains also occurred in nonstore retailers (+14,000), automobile dealers (+13,000), health and personal care stores (+10,000), and food and beverage stores (+8,000). Employment in retail trade was off by 411,000 in February.

The data makes SPDR S&P Retail ETF (XRT - Free Report)  a timely investment. The fund has a Zacks Rank #2 with a Medium risk outlook.

Our pick in this regard is Zacks Rank #2 BJs Wholesale Club Holdings Inc. (BJ - Free Report) . The company has emerged as one of the preferred destinations for shoppers when it comes to essentials and other items.

Construction

This sector created 51,000 jobs in December. The employment in the industry is 226,000 lower than its February level. In December, employment rose in residential specialty trade contractors (+14,000) and residential building (+9,000). Nonresidential specialty trade contractors  saw an 18,000additionand heavy and civil engineering construction fared wellwith a 15,000increase in jobs. 

Invesco Dynamic Building & Construction ETF (PKB - Free Report) has a Zacks Rank #3. Our stock pick is D.R. Horton Inc. (DHI). This home building and construction company has a Zacks Rank #1.

Health Care

Health care added 39,000 jobs in the month. The December job gains occurred in hospitals (+32,000) and in ambulatory health care services (+21,000). Health care employment is still lower by 502,000 than in February.

The fund iShares U.S. Healthcare Providers ETF (IHF - Free Report)  should thus benefit. The index of the fund looks to track stocks of health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes, etc. The fund has a Zacks Rank #3 (read: 4 Sector ETFs & Stocks to Bet on Q4 Earnings).

Investors can also take a look at Zacks Rank #3 HCA Healthcare Inc. (HCA - Free Report) . The company is the largest non-governmental operator of acute care hospitals in the United States.

Manufacturing

About 38,000 jobs were created in the sector in the month. Gains were palpable in motor vehicles

and parts (+7,000), plastics and rubber products (+7,000) and nonmetallic mineral products (+6,000) (read: How Are Industrial ETFs Expected to Perform in 2021?).

Obviously, such positive data makes us keep a close watch on Industrial Select Sector SPDR ETF (XLI - Free Report) . The underlying Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors. The fund has a Zacks ETF Rank #2.

In this regard, one can have a look at the Zacks Rank #3 stock AutoZone Inc. (AZO - Free Report) . The company is one of the nation’s leading specialty retailers and distributor of automotive replacement parts and accessories in the United States.

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