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U.S. employers added 222,000 new jobs in June, breezing past expectations of 179,000 and an upwardly revised 152,000 in May. Solid job gains in the health care, social assistance, financial activities, and mining sectors pushed up the total number. Note that the month of June marked the largest job gain in about four months (read: Trump Slump to Oil Slide: Top ETF Stories of First-Half 2017).

U.S. unemployment rate increased to 4.4% in June from a 16-year low of 4.3% last month and fell short of market expectations of 4.3%, but it gave bullish signals. This happened because more people were in search of work, reflecting confidence in the labor market, as per Reuters. Average job gains over the past six months came in at 180,000 per month, easily surpassing 75,000 to 100,000 required to maintain “growth in the working-age population.”

What About Wage Growth?

Wage growth picked up 2.5% year over year in June following a 2.4% rise in May.  On a sequential basis, wage growth was 0.2% in June. However, the market is still viewing this wage growth as slow, especially given the possibility of faster rises in rates.

As per chief U.S. economist at TS Lombard in New York, "wage inflation was never going to be a 2017 event. You get paid this year based on how your firm did last year and last year was a slow year for GDP and, more importantly, earnings." The economist reconfirmed that there is substantial wage growth in some industries, but the other industries are not participating in rapid growth to push up the average.

Market Impact

Whatever the case, market watchers are upbeat about the job market and the economy.  Traders’ bets on a Fed hike in December following a solid job report. Market watchers also expect an announcement in September about the start of reduction of the Fed's $4.2 trillion balance sheet.

PowerShares DB US Dollar Bullish ETF (UUP - Free Report) was up about 0.2% on July 7. The 30-year Treasury bond’s yield rose 3 basis points to 2.935%, its highest level since May 23. Against such a backdrop, several ETFs are expected to gain in the weeks ahead whereas some are likely to retreat. Below we have highlighted these options (read: How to Build a Winning ETF Portfolio for Second-Half 2017):

ETFs to Gain

iShares U.S. Healthcare Providers ETF (IHF - Free Report)

As per trading economics, health care added 37,000 jobs in the month, with employment specifically rising in ambulatory health care services (added 26,000 jobs) and hospitals (added 12,000 jobs). The index of the fund looks to track stocks of health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes etc. The Zacks Rank #1 (Strong Buy) stock added about 1% on July 7 (read: Top-Ranked Health Care ETFs to Buy Now).

First Trust Financials AlphaDEX Fund (FXO - Free Report)

Employment in financial activities rose by 17,000 in June. The sector is enjoying the dual benefits of job growth and a rising rate environment. The Zacks Rank #2 (Buy) fund added over 0.7% on July 7.

iShares Core S&P Small-Cap ETF (IJR - Free Report)

Since job data reflects U.S. economic growth momentum, small-cap ETFs like IJR should get a boost. Note that small-cap stocks better reflect the domestic economy. IJR gained about 1.1% on July 7. The fund has a Zacks ETF Rank #3 (Hold).

ETFs to Lose

SPDR Gold Trust ETF (GLD - Free Report)

The upbeat jobs report cast a pall on gold prices as the greenback gained strength. The fund lost over 1% and has a Zacks ETF Rank #3 (read: 6 ETFs to Buy if Global Tensions Flare Up).

iShares 20+ Year Treasury Bond ETF (TLT - Free Report)

The U.S. Treasuries dropped on the news, pushing the yields higher. This long-term Treasury bond ETF lost about 0.6% on the day. The fund has a Zacks ETF Rank #4 (Sell).

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