The U.S. economy lost 92,000 jobs in February, according to data released by the Labor Department on Friday. The decline sharply missed economists’ expectations and interrupted the modest hiring momentum seen at the start of the year.
Economists surveyed by Bloomberg had expected the economy to add about 55,000 jobs following January’s surprising gain of 130,000 payrolls, as quoted on Yahoo Finance. The unemployment rate rose slightly to 4.4%, signaling a rise in long-term joblessness.
Revisions Point to the Weakness
Earlier job data were also revised lower. January’s payroll gains were reduced by 4,000 jobs. December’s previously reported addition of 48,000 jobs was revised to a loss of 17,000. Together, the revisions erased a combined 69,000 jobs from the two prior employment reports.
Healthcare Drag
Healthcare — one of the few sectors that had been supporting job growth so far — shed 28,000 jobs in February, largely due to strike activity, according to the Labor Department.
Shruti Mishra, an economist at Bank of America Securities, had previously warned that a large strike involving Kaiser Permanente healthcare workers in California and Hawaii could weigh on the February payroll data. About 31,000 employees participated in the walkout, as quoted on the same Yahoo Finance article.
Will Rates Fall Now?
As the U.S. economy showed signs of weakness amid the Iran war and the oil prices rally on the Middle East tensions, the Fed may act dovish or not act too hawkish in the coming days. Note that oil prices climbed after Qatar's energy minister predicted the war on Iran will likely force Gulf exporters to shut off production within days and cautioned the move may boost prices to $150 a barrel, as quoted on a Yahoo Finance article.
The same article also noted that The Wall Street Journal reported that Kuwait has begun cutting oil production. So, oil price rise and the resultant spike in inflation may be a threat to the U.S economy. The Fed may choose to offer support to the economy in this situation and the treasury yields may move sideways.
Value ETFs in Focus
The entire equity market remained under pressure thanks to the double whammy of job shock and oil price spike. US oil prices notched their biggest weekly gain since at least 1985 on Friday, as quoted on Yahoo Finance.
Against this backdrop, investors can keep a track of the value ETFs. Value funds often act as a cushion against market volatility. Additionally, value ETFs can serve as a source of income through dividends. Investors with a medium to long-term investment horizon are better positioned to benefit from this strategy. Note that value ETFs do not underperform even in a rising rate environment.
Investors can consider Vanguard Value ETF VTV, State Street SPDR Portfolio S&P 500 Value ETF SPYV, ProShares S&P 500 Dividend Aristocrats ETF NOBL, and Vanguard High Dividend Yield Index Fund ETF Shares VYM.
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ProShares S&P 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports Vanguard Value Index Fund ETF Shares (VTV): ETF Research Reports Vanguard High Dividend Yield Index Fund ETF Shares (VYM): ETF Research Reports State Street SPDR Portfolio S&P 500 Value ETF (SPYV): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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