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August U.S. Hiring Rebounds Sharply: 5 ETFs Likely to Gain
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Key Takeaways
Strong August jobs growth signals resilient economic activity, benefiting cyclical ETFs.
AI ETFs can withstand rate pressure as long-term yields matter more for tech valuations.
Short-term and long-duration Treasury ETFs offer different ways to play shifting rate expectations.
The U.S. labor market showed renewed strength in August, reversing the slowdown seen over the summer. Nonfarm payrolls increased by a seasonally adjusted 162,000, marking the strongest monthly job gain since March, while the unemployment rate held steady at 4.1%, according to the Bureau of Labor Statistics.
The iob gains significantly topped the 53,000 jobs expected by economists surveyed by Dow Jones, as quoted on CNBC. The stronger-than-anticipated reading indicated that the labor market remains resilient and continues to support economic growth.
Prior Job Gains Revised Higher
July payrolls were revised to a gain of 21,000, reversing the previously reported 23,000-job decline. June payroll growth was revised higher by 11,000 to 31,000. These revisions provide more evidence that the summer labor-market slowdown may have been less severe than initially reported.
Fed Rate Hike Bets Rise
The stronger employment report could complicate the Federal Reserve’s policy outlook ahead of its Sept. 15-16 meeting. With the labor market showing greater resilience than expected, investors shifted somewhat toward the possibility of another rate hike.
Markets were still pricing in roughly a 60% probability of a 25-basis-point rate increase, according to CME Group’s FedWatch tool, at the time of writing.
Markets Reaction
U.S. stock futures moved mostly lower following the release of the jobs report, while Treasury yields climbed sharply, particularly at the short end of the curve, which is more sensitive to expectations for Federal Reserve policy. The market reaction reflected growing concerns about a likely rate hike this month.
Trump Urges Fed to Cut Rates
President Donald Trump, meanwhile, described the August employment report as a “great jobs number” but continued to call for lower interest rates.
Trump argued that elevated borrowing costs put the United States at a disadvantage and urged the Federal Reserve to reduce rates rather than raise them. He also threatened to halt trade with countries where the United States runs a deficit unless the Fed lowers rates.
ETFs to Play
Global X Artificial Intelligence & Technology ETF (AIQ - Free Report)
Artificial intelligence (AI)ETFs can remain attractive even if the Fed raises rates, as AI demand continues to drive spending across semiconductors, cloud and data centers. Moreover, tech valuations are influenced more by long-term rates than short-term Fed rates, while strong earnings growth can help offset valuation pressure from higher rates.
Note that the Fed rate hikes should push the short-term rates higher more than the longer ones. After the release of the jobs report, the yield on the 10-year U.S. Treasuries rose by one bp to 4.78% on Sept. 4, 2026, while the yield on two-year Treasuries rose by 3 bps to 4.37%.
Ultra-short-term bonds like SHV are often considered cash-like ETFs, which can act as a protection amid market volatility. Ultra-short-term bonds have lower interest rate risk, while U.S. Treasuries have lower default risk.
If the yields on the front part of the yield curve rise faster on Fed rate hike bets, investors can receive fatter current income in this less-risky instrument. Note that SHV was up 0.03% on Sept. 4, 2026, while yields were 3.70% annually. The ETF charges 15 bps in fees.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report)
The underlying BofA Merrill Lynch Long Treasury Principal STRIPS Index of the ZROZ fund looks to track the performance of U.S. Treasury STRIPS with long durations. ZROZ charges 15 bps in fees and yields 5.52% annually.
ZROZ is rising because long-dated U.S. Treasury yields have not been rising as fast as short-term yields. As a zero coupon, ultra long duration ETF, ZROZ is extremely sensitive to those moves.
Zero coupon bonds do not pay regular current income. Rising market interest rates, hence, cause their secondary market value to fall faster than regular bonds.
State Street Industrial Select Sector SPDR ETF (XLI - Free Report)
The manufacturing sector added 16,000 positions. The U.S. industrial sector’s stocks are gaining currently on expectations of stronger economic activity, rising defense spending, reshoring and AI-related infrastructure investment, which are boosting demand for industrial companies. The ETF XLI gained 0.4% on Sept. 4, 2026, although the broader-market U.S. ETF State Street SPDR S&P 500 ETF Trust (SPY - Free Report) slipped about 0.4% on the day.
Restaurants and bars led the increase, adding 59,000 jobs. This job growth points to increased activity in the restaurant sector, which, in turn, is likely to benefit food stocks. The underlying Dynamic Food & Beverage Intellidex Index comprises stocks of 30 U.S. food and beverage companies. These are companies that are principally engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of new food technologies.
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August U.S. Hiring Rebounds Sharply: 5 ETFs Likely to Gain
Key Takeaways
The U.S. labor market showed renewed strength in August, reversing the slowdown seen over the summer. Nonfarm payrolls increased by a seasonally adjusted 162,000, marking the strongest monthly job gain since March, while the unemployment rate held steady at 4.1%, according to the Bureau of Labor Statistics.
The iob gains significantly topped the 53,000 jobs expected by economists surveyed by Dow Jones, as quoted on CNBC. The stronger-than-anticipated reading indicated that the labor market remains resilient and continues to support economic growth.
Prior Job Gains Revised Higher
July payrolls were revised to a gain of 21,000, reversing the previously reported 23,000-job decline. June payroll growth was revised higher by 11,000 to 31,000. These revisions provide more evidence that the summer labor-market slowdown may have been less severe than initially reported.
Fed Rate Hike Bets Rise
The stronger employment report could complicate the Federal Reserve’s policy outlook ahead of its Sept. 15-16 meeting. With the labor market showing greater resilience than expected, investors shifted somewhat toward the possibility of another rate hike.
Markets were still pricing in roughly a 60% probability of a 25-basis-point rate increase, according to CME Group’s FedWatch tool, at the time of writing.
Markets Reaction
U.S. stock futures moved mostly lower following the release of the jobs report, while Treasury yields climbed sharply, particularly at the short end of the curve, which is more sensitive to expectations for Federal Reserve policy. The market reaction reflected growing concerns about a likely rate hike this month.
Trump Urges Fed to Cut Rates
President Donald Trump, meanwhile, described the August employment report as a “great jobs number” but continued to call for lower interest rates.
Trump argued that elevated borrowing costs put the United States at a disadvantage and urged the Federal Reserve to reduce rates rather than raise them. He also threatened to halt trade with countries where the United States runs a deficit unless the Fed lowers rates.
ETFs to Play
Global X Artificial Intelligence & Technology ETF (AIQ - Free Report)
Artificial intelligence (AI)ETFs can remain attractive even if the Fed raises rates, as AI demand continues to drive spending across semiconductors, cloud and data centers. Moreover, tech valuations are influenced more by long-term rates than short-term Fed rates, while strong earnings growth can help offset valuation pressure from higher rates.
Note that the Fed rate hikes should push the short-term rates higher more than the longer ones. After the release of the jobs report, the yield on the 10-year U.S. Treasuries rose by one bp to 4.78% on Sept. 4, 2026, while the yield on two-year Treasuries rose by 3 bps to 4.37%.
iShares 0-1 Year Treasury Bond ETF (SHV - Free Report)
Ultra-short-term bonds like SHV are often considered cash-like ETFs, which can act as a protection amid market volatility. Ultra-short-term bonds have lower interest rate risk, while U.S. Treasuries have lower default risk.
If the yields on the front part of the yield curve rise faster on Fed rate hike bets, investors can receive fatter current income in this less-risky instrument. Note that SHV was up 0.03% on Sept. 4, 2026, while yields were 3.70% annually. The ETF charges 15 bps in fees.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report)
The underlying BofA Merrill Lynch Long Treasury Principal STRIPS Index of the ZROZ fund looks to track the performance of U.S. Treasury STRIPS with long durations. ZROZ charges 15 bps in fees and yields 5.52% annually.
ZROZ is rising because long-dated U.S. Treasury yields have not been rising as fast as short-term yields. As a zero coupon, ultra long duration ETF, ZROZ is extremely sensitive to those moves.
Zero coupon bonds do not pay regular current income. Rising market interest rates, hence, cause their secondary market value to fall faster than regular bonds.
State Street Industrial Select Sector SPDR ETF (XLI - Free Report)
The manufacturing sector added 16,000 positions. The U.S. industrial sector’s stocks are gaining currently on expectations of stronger economic activity, rising defense spending, reshoring and AI-related infrastructure investment, which are boosting demand for industrial companies. The ETF XLI gained 0.4% on Sept. 4, 2026, although the broader-market U.S. ETF State Street SPDR S&P 500 ETF Trust (SPY - Free Report) slipped about 0.4% on the day.
Invesco Food & Beverage ETF (PBJ - Free Report)
Restaurants and bars led the increase, adding 59,000 jobs. This job growth points to increased activity in the restaurant sector, which, in turn, is likely to benefit food stocks. The underlying Dynamic Food & Beverage Intellidex Index comprises stocks of 30 U.S. food and beverage companies. These are companies that are principally engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of new food technologies.