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Sector ETFs to Win on Strong November Job Data (Revised)

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U.S. employers added 228,000 new jobs in November, ahead of market expectations of 200,000. The data however fell short of the downwardly revised 244,000 in October. After revisions, job growth has averaged 170,000 for the last three months.

Solid job gains in the professional and business services, manufacturing, and health care sectors pushed up the total number, as per trading economics. The unemployment rate was 4.1% -- about a 17-year low – as U.S. employers recorded more-than-expected hiring. November marked the 86th straight month of gains, the lengthiest on record.

However, wage growth remained moderate, having grown only 2.5% on a year-over-year basis. Investors should note that there will likely be changes in the sector’s performance post solid job data. Below we highlight a few sector ETFs that registered decent job growth in the month and will thus be in focus ahead.

Likely Winners

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

Jobs in the health care sector grew by 30,000 in November. As per tradingeconomics, “most of the gain occurred in ambulatory health care services (+25,000), which includes offices of physicians and outpatient care centers.” Job growth per month in health care has averaged 24,000 thus far in 2017 compared with the industry's average monthly job growth of 32,000 in 2016. This indicates the sector is in a decent position for the last two years.

The fund, which gives exposure to health maintenance organizations, hospitals, clinics, dentists, opticians and nursing homes rehabilitation, has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 4 ETFs to Gain From CVS-Aetna Deal).

Industrial Select Sector SPDR ETF (XLI - Free Report)

In November, the manufacturing sector generated 31,000 jobs. Within the industry, areas like manufacturing (up 8,000), fabricated metal products (up 7,000) and plastics and rubber products (up 4,000) deserve special mention, as per Tradingeconomics. After hitting a low in November 2016, manufacturing employment has grown 189,000.

As per an article published on abcnews.go.com, the upbeat international fundamentals is giving a boost to U.S. hiring, even in the manufacturing sector. Plus, the Trump administration is now eyeing infrastructure reform.

In his campaign days, Donald Trump said that he is in favor of beefing up public spending by hundreds of billions of dollars on infrastructure. In fact, he intends to deploy $200 billion in federal money over the next decade to “incentivize another $800 billion in spending from state and local authorities and private entities.”

All these make it clear why manufacturing activity is charged-up at the current level and helping the sector’s job growth (read: Industrial ETFs at All-Time Highs: Any Value Left for 2018?).

VanEck Vectors Semiconductor ETF (SMH)

Notably, within manufacturing, employment in the computer and electronic products category increased 4,000 in November. This tendency should give positive cues for chip-making companies, benefiting this Zacks Rank #1 (Strong Buy) ETF SMH. Plus, fundamentals remain strong for chip stocks in the holiday season as consumers rush to buy gadgets and electronics (read: Tap Nvidia Growth Story With These Tech ETFs).

(We are reissuing this article to correct a mistake. The original article, issued on Dec 11, 2017, which incorrectly mentioned PowerShares Dynamic Building & Construction Portfolio (PKB - Free Report) instead of VanEck Vectors Semiconductor ETF (SMH), should no longer be relied upon.)

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