U.S. employers added 103,000 new jobs in March, after an upwardly revised 326,000 job gains in February and falling short of market expectations of 193,000 jobs. However, job gains in January have been revised down from 239,000 to 176,000. After revision, total employment gains in January and February were 50,000 less than reported earlier.
Rate of unemployment was 4.1% — its lowest since December 2000 and unchanged from the prior month. While some sectors gained, falloffs were noticed in retail and construction sectors. In March, retail trade employment saw 4000 job losses, after increasing by 47,000 in February (read: US Retail Sales Fall for 3 Straight Months: ETFs in Focus).
And employment in construction retreated by 15,000, after a solid increase of 65,000 in February. Investors should note that though the report was utterly downbeat, wage growth is the bright spot in the latest job report. Average hourly wages rose 0.3%, pushing the year-over-year increase to 2.7%.
Another implication of the job report can be viewed as market friendly. The Fed has sounded pretty optimistic about the market in recent times. This in turn has flared talks of faster policy tightening. The Fed has forecast three rate hikes for this year but faster inflation could force the Fed to raise rates more frequently.
Against this backdrop, a muted jobs’ report push down the benchmark U.S. Treasury yield to 2.77% on Apr 6 from 2.83% from the day earlier. Investors perceived the U.S. jobs report as a deterrent to the path of Fed policy tightening.
Wining Sector ETFs
Against this backdrop, 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.
Industrial Select Sector SPDR Fund (XLI - Free Report)
The manufacturing sector added 22,000 jobs in March. Over the past year, manufacturing has created 232,000 jobs. Agreed, the fund is susceptible to the ongoing trade dispute between the United States and China. But the tariffs are yet to be enacted and both countries could come to a negotiation before derailing the global growth momentum (read: 8 Top-Ranked Low P/E Cyclical Sector ETFs to Buy Right Now).
SPDR S&P Metals and Mining ETF (XME - Free Report)
As per tradingeconomics, about 9,000 jobs were created in the mining sector in the month. Since a recent low in October 2016, mining has managed to add 78,000 jobs.
First Trust Health Care AlphaDEX Fund (FXH - Free Report)
Jobs in the health care sector grew by 22,000 in the month, wherein hospitals gained 10,000 and health care services added 16,000 jobs. Per tradingeconomics, job creation in March was in line with its average monthly gain over the last one year (read: 4 Sector ETFs That Crushed S&P 500 in 9-Year Bull Run).
U.S. Treasury ETFs: A Winner
Since long-term bond yields dived, iShares 20+ Year Treasury Bond ETF (TLT - Free Report) added about 1.1% on Apr 6. Investors’ flight to safety in the wake of trade war fear and subdued job growth in the United States made this safe-haven fund a winner.
Will TIPS Gain on Wage Push Inflation?
Since wage growth is picking pace in America, a wage push inflation can be seen in the coming days. This is because, to keep up the margins after an uptick in wages, corporations may hike the prices of goods and services. Again, a rise in wages is needed to support the higher prices of consumer goods. All these moves result in higher inflation at the end. If this happens in the United States, iShares TIPS Bond ETF (TIP - Free Report) is likely to gain.The fund added about 0.4% on Apr 6 (read: Do ETF Investors Need Inflation Protection Now?).
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