Ignore Dismal Jobs Numbers With These 5 Great Services Picks
Zacks Investment Research | Sep 10, 2019 07:13AM ET
On Sep 6, investors received the most disappointing economic report released recently. Private sector job additions for the month of August came in well below expectations, leading to new questions about the sustainability of the ongoing economic expansion. Most job gains were attributable to a temporary jump caused by the hiring of census workers.
Job gains for the previous months were also revised lower, further accelerating the concerns surrounding the economy. And these fears persist, despite the fact that the growth rate lingers at nearly 2% despite hitting 3% only a year ago. Happily, the services sector remains untouched by recessionary fears. This is why it makes sense to invest in service sector stocks.
Jobs Report Disappoints, Unemployment Steady
In August, the U.S. economy added 130,000 jobs, well below the consensus estimate of 163,000. Even this level of job gains was largely attributable to the temporary recruitment of Census workers, as per data from the Department of Labor. But unemployment remained flat at 3.7%, in line with expectations.
However, the U6 unemployment rate, which includes people forced into part-time work and those only sporadically looking for jobs, increased marginally, from 7% in July to 7.2%. This was primarily due to an increase of 397,000 in the number of individuals working part time due to economic reasons.
Business Services Leads Jobs Gains
Despite the disappointingly low number of job additions, wage growth remained steady, providing some respite to beleaguered investors. Average hourly earnings increased 0.4% during August. The metric also notched up a year-over-year gain of 3.2%. Moreover, both these figures exceeded expectations.
Additionally, labor force participation increased to 63.2%, matching the highest level recorded since August 2013. The separately conducted household survey revealed that the total number of employed Americans increased by 590,000 to touch the unprecedented level of 157.9 million.
Once again, professional and business services led the pack with job gains of 37,000. The federal government came in second, after adding 28,000 workers to the 2020 population census. The healthcare sector added 24,000 jobs while financial services contributed 15,000 additional positions. However, retail trade experienced a loss of more than 11,000 positions.
Our Choices
August’s jobs numbers have added to the worries about the ongoing economic expansion. However, the report is also a reminder of the resilience of the services sector, which is powering economic growth at a time when the manufacturing and farming sectors are fighting a bruising trade war.
This is why investing in service sector stocks remains a prudent choice. However, picking winning stocks may be difficult.
This is where our Zacks Investment Research
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