Hiring picked up in July and the economy has fully recovered all the jobs it lost during the COVID-19 shutdowns. This is especially true as the United States added 528,000 jobs, more than double the expectation of nearly 250,000 gains. Meanwhile, the unemployment rate fell to the pre-pandemic levels of 3.5%.
A few ETFs are likely to surge in a booming job market and are the direct beneficiaries of job growth. These include Invesco Dynamic Leisure and Entertainment ETF ( PEJ Quick Quote PEJ - Free Report) , Consumer Discretionary Select Sector SPDR Fund ( XLY Quick Quote XLY - Free Report) , SPDR S&P Health Care Services ETF ( XHS Quick Quote XHS - Free Report) , iShares U.S. Industrials ETF ( IYJ Quick Quote IYJ - Free Report) and SPDR S&P Regional Banking ETF ( KRE Quick Quote KRE - Free Report) . July gains were the best since February and well ahead of the 388,000 average job rise over the past four months. The job gains were broad-based across sectors and industries, led by gains in the leisure and hospitality, professional and business services, and healthcare sectors. The leisure and hospitality sector added 96,000 jobs, while professional and business services added 89,000 jobs. The healthcare sector added 70,000 jobs and government payrolls grew 57,000. Goods-producing industries also posted solid gains, with construction up 32,000 and manufacturing adding 30,000. Retail jobs also increased by 22,000. Additionally, wage growth came in stronger than expected, with average hourly earnings rising 0.5% last month from June and 5.2% from a year ago. The robust numbers coupled with hotter-than-expected wage growth will add to inflationary pressures and could pave the way for the third consecutive 75-bps increase at the Fed's next policy-setting meeting in September. So far, the Fed has raised interest rates four times this year, taking the rate to the range of 2.25% and 2.5% (read: Fed Hikes Rates by 0.75%: ETFs to Win). ETF Picks Invesco Dynamic Leisure and Entertainment ETF ( PEJ Quick Quote PEJ - Free Report) As the leisure and hospitality segment saw the biggest job increase, PEJ is set to surge. Invesco Dynamic Leisure and Entertainment ETF offers exposure to companies that are principally engaged in the design, production or distribution of goods or services in the leisure and entertainment industries. It tracks the Dynamic Leisure and Entertainment Intellidex Index and holds 31 stocks in its basket (read: 5 Sector ETFs to Win from a 9% U.S. Inflation). Invesco Dynamic Leisure and Entertainment ETF has amassed $1.1 billion in its asset base and has 0.55% in expense ratio. PEJ trades in a paltry volume of 303,000 shares per day on average and has a Zacks ETF Rank #3 (Hold) with a High risk outlook. Consumer Discretionary Select Sector SPDR Fund ( XLY Quick Quote XLY - Free Report) Increased wages will pump up consumers’ power to spend more on luxury items. While most of the consumer discretionary ETFs will benefit from this trend, the ultra-popular XLY having AUM of $16.7 billion and an average daily volume of 6 million shares, could be a compelling choice. It targets the broad consumer discretionary sector and tracks the Consumer Discretionary Select Sector Index. Consumer Discretionary Select Sector SPDR Fund holds 58 securities in its basket and charges 10 bps in fees per year. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. SPDR S&P Health Care Services ETF ( XHS Quick Quote XHS - Free Report) A higher number of hiring in the healthcare service sector makes XHS an attractive pick. SPDR S&P Health Care Services ETF uses an equal-weight methodology for each security by tracking the S&P Health Care Services Select Industry Index. It holds 70 stocks in its basket (read: Biotech Wins Last Week: 5 Best ETFs). SPDR S&P Health Care Services ETF has amassed $123 million in its asset base and trades in a paltry volume of around 11,000 shares a day. The expense ratio comes in at 0.35%. XHS has a Zacks ETF Rank #3 with a Medium risk outlook. iShares U.S. Industrials ETF ( IYJ Quick Quote IYJ - Free Report) iShares U.S. Industrials ETF offers exposure to 177 U.S. companies that produce goods used in construction and manufacturing by tracking Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index. iShares U.S. Industrials ETF is tilted toward capital goods’ companies at 43%, while software services and transportation round off the next two spots with double-digit exposure each. iShares U.S. Industrials ETF has an AUM of $1.1 billion and an average daily volume of around 100,000 shares. It charges 41 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. SPDR S&P Regional Banking ETF ( KRE Quick Quote KRE - Free Report) A rising rate scenario is highly profitable for the banks as these seek to borrow money at short-term rates and lend at long-term rates, thereby resulting in expanding net margins and bolstering banks’ profits. SPDR S&P Regional Banking ETF targets the banking corner of the financial sector and follows the S&P Regional Banks Select Industry Index. It holds 144 stocks in its basket. SPDR S&P Regional Banking ETF is one of the largest and the most popular ETFs in the banking space, with AUM of $3.1 billion and an average daily volume of around 6.7 million shares. It charges 35 bps a year in fees and has a Zacks ETF Rank #1 with a High risk outlook.