The U.S. labor market has been on an expansionary mode. The economy added 201,000 jobs in August, above analysts’ expectation of 191,000 as surveyed by Reuters. This represents 95 consecutive months of job additions -- the longest growth streak.
Most of the job gains came from solid hiring in professional and business services, which added 53,000 workers. This was followed by increases of 33,000 in healthcare, 22,000 in wholesale trade, 20,000 in transport & warehousing, and 6,000 in mining. Notably, manufacturing shed 3,000 jobs — representing the first monthly decline since July 2017. The unemployment rate remained stable at nearly a two-decade low of 3.9%. Average hourly wages accelerated 10 cents to $27.16, bringing the year-over-year increase to 2.9%, the biggest yearly rise since April 2009. However, the job numbers for June and July were revised down by 50,000 from 248,000 to 208,000 and from 157,000 to 147,000, respectively. The pickup in employment and solid wage growth has bolstered the possibility of faster interest rate hikes and will continue to keep the Fed on track to raise interest rates twice this year with the one hike as soon as this month. Additionally, solid pay gains will increase consumer spending, which will translate into stepped-up economic activity (read: Consumer Spending Rises Again in July: ETFs in Focus). The massive $1.5 trillion fiscal stimulus plan and tax overhaul has been acting as a major catalyst, outplaying the concerns over trade war. U.S. GDP growth expanded 4.2% year over year in the second quarter, representing the fastest pace of growth in nearly four years. VIDEO
Against such a backdrop, we have highlighted four ETFs and stocks that are the direct beneficiaries of the job gains and wage growth, and will likely see smooth trading in the days ahead.
ETF Picks Invesco DB US Dollar Index Bullish Fund UUP An accelerating job market and the resultant improving economy will pull in more capital into the country and lead to appreciation of the U.S. dollar. UUP is the prime beneficiary of a rising dollar as it offers exposure to a basket of six world currencies by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return. In terms of holdings, UUP allocates nearly 57.6% in euro and 25.5% collectively in the Japanese yen and British pound. The fund has so far managed an asset base of $556.3 million, while sees an average daily volume of around 1 million shares. It charges 79 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Consumer Discretionary Select Sector SPDR Fund XLY Solid wage growth and robust job gains will continue to increase consumers’ power to spend more on luxury items. While most of the consumer discretionary ETFs will benefit from this trend, the ultra-popular XLY having AUM of $15.8 billion and average daily volume of 5.2 million shares could be a compelling choice. It tracks the Consumer Discretionary Select Sector Index and holds 80 securities with higher concentration on the top firm Amazon (AMZN) at 25.1%. Other firms make up for a nice mix with each holding less than 7.6% of assets. The fund charges 13 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Amazon Hits Trillion Dollar Market Cap: ETFs to Buy). SPDR S&P Retail ETF XRT Retail will also benefit from accelerating job and wage growth. XRT tracks the S&P Retail Select Industry Index, holding 89 securities in its basket. It is widely spread across each component as none of these holds more than 1.94% of total assets. The product is the most popular and actively traded ETF in the retail space, with AUM of about $785.5 million and average daily volume of around 5.2 million shares. It charges 35 bps in annual fees. The fund has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. iShares Currency Hedged MSCI EAFE ETF HEFA The strength in the greenback is compelling investors to recycle their portfolio into the currency hedged ETFs. For those seeking exposure to the developed market with no currency risk, HEFA could be an intriguing pick. The fund targets the developed international stock market with no currency risk and tracks the MSCI EAFE 100% Hedged to USD Index. It is widely spread across sectors with financials, industrials and consumer discretionary making the top three. Among countries, Japan takes the top spot at 23.9%, closely followed by United Kingdom (17.1%), France (11%) and Germany (9.4%). It has AUM of $3.3 billion and trades in solid volume of 772,000 shares. The fund charges 35 bps in fees per year from investors and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Dollar on a Bull Ride: ETFs to Buy/Avoid). Stock Picks Robert Half International Inc ( RHI Quick Quote RHI - Free Report) Based in Menlo Park, CA, Robert Half is the world's first and largest specialized staffing firm. The company is expected to deliver earnings growth of 32.69% for this year and has a market cap of $8.87 billion. It carries a Zacks Rank #2 and has a VGM Score of A. Additionally, Robert Half belongs to the top-ranked Zacks industry ( top 40%). CRA International Inc. CRAI Based in Boston, MA, CRA International is a consulting company that provides economic, financial, and management consulting services in the United States, the United Kingdom and internationally. With a market cap of $453.84 million, it falls under the top-ranked Zacks industry ( top 28%). The stock is expected to post earnings at a growth rate of 19.34% year over year for this year. It has a Zacks Rank #1 and VGM Score of B. You can see . the complete list of today’s Zacks #1 Rank stocks here Urban Outfitters Inc. URBN Based in Philadelphia, PA, Urban Outfitters is a lifestyle products and services company that is engaged in the retail and wholesale of general consumer products. It has a solid earnings growth projection of 59.28% for the fiscal year (ending January 2019) and belongs to a top-ranked Zacks industry ( top 23%). With a market cap of $4.73 billion, the stock has a Zacks Rank #1 and a VGM Score of B (read: 6 Reasons to Bet on Retail ETFs Now). Guess' Inc. GES Based in Los Angeles, CA, Guess' designs, markets, distributes and licenses lifestyle collections of apparel and accessories for men, women and children. The company is expected to deliver earnings growth of 48.57% for the fiscal year (ending January 2019) and has a market cap of $1.80 billion. It sports a Zacks Rank #1 and has a VGM Score of A. Additionally, the stock belongs to a top-ranked Zacks industry ( top 8%). Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>