4 Sector ETFs & Stocks Likely to Benefit Despite Soft Jobs Data

The U.S. economy added 175,000 jobs in April, well below Wall Street expectations of 240,000, strengthening bets that the Federal Reserve will be able to cut interest rates in the coming months. Health care and social assistance led the way with a gain of 87,000 jobs.

The unemployment rate ticked higher to 3.9% against expectations it would hold steady at 3.8%. Average hourly earnings rose 0.2% sequentially and 3.9% year over year, both below consensus estimates. The jobless rate tied for the highest level since January 2022. The labor force participation rate, or those actively looking for work, was unchanged at 62.7%.

The slower job growth could be good news on the inflation front but cause economic slowdown. Below, we have highlighted some of the sectors that will likely see smooth trading in the days ahead in light of the April jobs data.

Sectors in Focus

Healthcare

Employment in the healthcare industry increased by 56,000 in jobs, in line with the average monthly gain of 63,000 over the prior 12 months. Considerable job gains occurred in ambulatory health care services (+33,000), hospitals (+14,000), and nursing and residential care facilities (+9,000)

The Zacks Rank #1 (Strong Buy) Health Care Select Sector SPDR ETF XLV can be played to tap the moderate momentum. Tenet Healthcare THC, which has a Zacks Rank #1 deserves a mention. It is an investor-owned health care services company, which owns and operates general hospitals and related health care facilities for urban and rural communities in numerous states, and has offices in California and Florida.             

Transportation

Employment in transportation and warehousing rose by 22,000 in April. In April, employment also increased in couriers and messengers (+8,000) and warehousing and storage (+8,000) were also notable. Zacks Rank #2 (Buy) SPDR S&P Transportation ETF XTN can thus be considered for a play. Airlines company Alaska Air Group ALK has a Zacks Rank #2.

Retail

Retail trade continued to trend up in April (+20,000). Over the prior 12 months, the industry had added an average of 7,000 jobs per month. In April, notable employment was seen in areas like general merchandise retailers (+10,000), building material and garden equipment and supplies dealers (+7,000), and health and personal care retailers (+5,000).

As far as the fund is concerned, SPDR S&P Retail ETF XRT has a Zacks Rank #2. The Kroger Co. KR, which operates in the thin-margin grocery industry, also has a Zacks Rank #2.

Construction

In April, employment in construction (+9,000), following an increase of 40,000 in March. Over the prior 12 months, construction had added an average of 22,000 jobs per month. Investors can keep a watch on the price movement of Invesco Dynamic Building & Construction ETF PKB.

The fund PKB is comprised of stocks of U.S. building and construction companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

As far as the stock is concerned, Zacks Rank #1 Dycom Industries DY is a top bet. It is a leading provider of specialty contracting services throughout the United States.

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