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4 Sector ETFs to Profit From Strong May Jobs Data

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U.S. employers added 223,000 new jobs in May, breezing past a downwardly revised 159,000 in April, market expectations of 189,000 and the trailing 3-month average of 179,000. The unemployment rate dropped to 3.8% last month, marking the lowest since April 2000.

The “real unemployment,” fell to 7.6% — the lowest in 18 years, indicating tightening labor market conditions. Average hourly earnings for all employees on private nonfarm payrolls grew 8 cents to $26.92. Over the year, average hourly earnings have risen 2.7%.

Winning Sector ETFs

Against this backdrop, investors should bet on ETFs that are the largest beneficiaries of the May jobs data. Below we have highlighted some of these that will likely see smooth trading in the days ahead.

Retail

The showstopper was retail, which added 31,000 jobs in May. In the past year, retail has created 125,000 jobs. Most of the gains (13,000) came from the general merchandise stores, while building material and garden supply stores created 8,000 and 4,000 jobs, respectively.

SPDR S&P Retail ETF (XRT - Free Report)

The 85-stock fund puts 25.36% weight in Apparel, followed by 16.41% in   Internet & Direct Marketing Retail, 15.15% in Specialty Stores and 14.35% in Automotive Retail. The fund charges 35 bps in fees.

Health Care

Jobs in the health care sector grew by 29,000 in the month, wherein ambulatory health care services and hospitals gained 18,000 and 6,000 jobs. Per tradingeconomics, the reading in May was on par with the average monthly gain noted in the past year (read: Disruptive ETFs to Buy: Blockchain and Online Retail).

First Trust Health Care AlphaDEX Fund (FXH - Free Report)

The 72-stock fund are heavy on Health Care Providers & Services(36.8%) and Health Care Equipment & Supplies (28.28%). Biotechnology takes the third position in the fund with about 11.86% focus. The fund charges 62 bps in fees.

Construction

As per tradingeconomics, about 25,000 jobs were created in the construction sector in the month. Over a year, the sector has generated about 286,000 jobs. Nonresidential specialty trade contractors added 15,000 jobs over the month.

Invesco Dynamic Building & Construction ETF (PKB - Free Report)

The underlying index picks building and construction stocks on the basis of factors like price momentum, earnings momentum, quality, management action and value. The fund holds 38 stocks in total (read: 5 Sector ETFs to Benefit from Q1 Revenue Growth).

Transportation

The transportation sector added 19,000 jobs in May. Over a year, transportation has created 156,000 jobs. Job gains mainly came from warehousing and storage (7,000) and couriers and messengers (5,000), per tradingeconomics.

SPDR S&P Transportation ETF (XTN - Free Report)

The 42-stock fund puts 31.88% weight in Trucking, 25.4% in Air Freight & Logistics, 22.88% in Airlines and 13.14% in Railroads. The fund charges 35 bps in fees (read: Solid Small-Cap Earnings Put Spotlight on These Sector ETFs).

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