Hiring Rise; Wage Growth Most Since 2009: 5 Top Fund Picks

The U.S. economy experienced strong jobs growth in the first month of this year, with average hourly wages posting its best yearly increase since June 2009. Also, the unemployment rate remained at its lowest levels since 2000, reflecting tighter labor market conditions. An upbeat jobs report indicated a rosier economy. Construction, restaurant, healthcare and manufacturing companies led the way for job creation. In this context, investing in mutual funds that have significant exposure to these sectors seems judicious.

Average Hourly Wage Post Best Annual Rise Since 2009

According to the U.S. Bureau of Labor Statistics, average hourly earnings rose by 0.3%, or 9 cents, to $26.74 in January, up 2.9% for the year, marking its highest yearly growth since mid 2009. Average hourly earnings for sectors like manufacturing, construction and restaurant rose 3 cents each. Some other industries like information, professional and business services, and education and health services saw an average hourly increase of 21 cents, 18 cents and 11 cents, respectively. Further, private-service providers generated average hourly earnings of 10 cents.

Moreover, the jobless rate remained at a 17-year low of 4.1% in January, while domestic non-farm payrolls increased by 200,000, after creating 160,000 jobs last December. Strong job additions and stunning wage growth clearly indicated that the U.S. economy is steadily moving toward full employment.

Sectors That Led to Job Gains

Construction employment increased by 36,000 in January, with specialty trade contractors becoming its biggest contributor with 26,000 job additions. Residential building construction also created more than 5,000 jobs. In the last one year, the construction sector generated 226,000 jobs.

Additionally, restaurant chains witnessed around 31,000 job creations in January, adding 255,000 jobs in the past one year. Also, healthcare employment rose by 21,000 last month and an average of 24,000 jobs were created in 2017. Hospitals contributed 13,000 jobs to the sector in January.

Employment in the manufacturing sector rose by 15,000 in January,despite lack of skilled labor. The sector also added 186,000 jobs over the year.

Buy These 5 Sectoral Mutual Funds

Here, we have selected mutual funds that have significant exposure to sectors that saw strong job additions in January. All these funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Further, these funds have encouraging one-year annualized returns and minimum initial investment within $5000. Also, these funds have low expense ratios.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Fidelity Select Construction & Housing Portfolio FSHOX invests a major portion of its assets in securities of companies involved in construction and design of commercial, residential and industrial facilities. The fund seeks growth of capital. FSHOX invests mainly in common stocks. The fund invests in both U.S. and non-U.S. companies.

The fund has one-year annualized returns of 23.6% and an expense ratio of 0.79% compared with the category average of 1.22%. FSHOX has a Zacks Mutual Fund Rank #2.

Fidelity Select Transportation FSRFX seeks capital growth. FSRFX invests a large part of its assets in securities of companies involved in design, manufacture and sale of transportation equipment as well as providing transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.

The fund has one-year annualized returns of 19.4% and an expense ratio of 0.82% compared with the category average of 1.33%. FSRFX has a Zacks Mutual Fund Rank #2.

Fidelity Select Health Care Services Portfolio FSHCX invests the majority of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.

The fund has one-year annualized returns of 25.8% and an expense ratio of 0.78% compared with the category average of 1.33%. FSHCX has a Zacks Mutual Fund Rank #1.

T. Rowe Price Health Sciences PRHSX invests its net assets heavily in common stocks of companies involved in research, development, production, or distribution of products or services related to health care and life sciences. PRHSX may invest in companies of any size, with the majority of its assets is invested in large and mid-cap companies.

The fund has one-year annualized returns of 29.1% and an expense ratio of 0.77% compared with the category average of 1.33%. PRHSX has a Zacks Mutual Fund Rank #2.

Fidelity Select Consumer Discretionary Portfolio FSCPX invests a huge chunk of its assets in securities of companies involved in the manufacture and distribution of consumer discretionary products and services. FSCPX normally invests in both U.S. and non-U.S. companies.

The fund has one-year annualized returns of 26.7% and an expense ratio of 0.76% compared with the category average of 1.41%. FSCPX has a Zacks Mutual Fund Rank #1.

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