The US jobs market has shown resilience despite the slow growth and high-interest rate environment. The US Jobless Claims further dropped by 22,000 to 242,000, which beat the Reuters poll of 254,000. This indicates a strengthening jobs market as unemployed people find new work.
According to the article by Reuters, “The labor market has remained tight, with 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range that is consistent with a jobs market that is not generating too much inflation.” This opens up an opportunity to look closely at sectors that benefit from a strong jobs market.
- How Does a Strong Jobs Market Help Investors?
- Increased Consumer Spending
A strong jobs market generally leads to increased employment levels and income growth. When the general population has jobs, more disposable income is available. Consumers tend to spend more on goods and services, and increased consumer spending can help boost the revenue and profitability of companies that help increase the value of stock prices.
- Higher Corporate Earnings
A healthy economy is often indicated by its robust job market. When businesses thrive and expand, this helps generate higher sales and profits to increase corporate earnings, which helps drive stock prices upward, making investments more valuable.
- Long-Term Economic Growth
The overall economy is also benefitting from a strong jobs market. This is often a positive indication of future economic growth. This helps drive consumer confidence and increase demand and growth for companies in the long term.
- What Qualities Should Investors Look Into?
- Industry Performance
In a hot jobs market, investors can look at industries that thrive in a market, like consumer discretionary, technology, and healthcare. These sectors tend to benefit from increased consumer spending and demand.
- Company Financials
When investing, the rule of thumb is for investors to analyze the financial health of the companies they want to invest in. They must examine the companies’ key metrics like revenue growth, earnings stability, profit margins, and debt levels. Strong financials provide investors with a general barometer of a company's ability to capitalize on favorable job market conditions.
- Competitive Advantage
Companies with a competitive position within their industry tend to lead the pack. Ones with unique products, services, or market dominance can withstand potential competition and sustain growth in a strong job market.
- Market Demand
Like any kind of business, demand for a company's products or services is one of the main drivers for growth. In a strong job market, consumers' higher purchasing power helps drive more sales and revenue for businesses.
Now let’s look at some leading companies in sectors that benefit from a strong jobs market.
- Amazon.com, Inc.
Amazon.com, Inc. (NASDAQ:AMZN) provides a range of products and services to customers through its stores, including merchandise and content that it purchased for resale and products offered by third-party sellers.
The company manufactures and sells electronic devices, including Kindle, Fire tablet, Echo, Fire TV, and Ring. The company has also ventured into developing and producing media content and offers subscription services such as Amazon Prime, a membership program. The company operates in the segments:
- North America
- Amazon Web Services (AWS)
The company AWS segment consists of global sales of computing, storage, database, and other services targeted for start-ups, government agencies, enterprises, and academic institutions. The company is one of the largest companies in the world and is a behemoth in the e-commerce world. With its reach spanning different countries, it stands to be one of the main beneficiaries of a strong jobs market.
- Apple Inc
Apple Inc (NASDAQ:AAPL) is a technology company that designs, manufactures, and markets smartphones, tablets, personal computers, wearables, and accessories and sells a range of related services. The company’s main products include:
- Apple TV
- Apple Watch
- Beats products
- iPod touch
The company operates various platforms like its App Store, which allows customers to discover and download applications and digital content, such as books, videos, music, games, and podcasts. Apple also offers digital content through subscription-based services, including Apple Arcade, Apple News+, Apple Music, Apple TV+, and Apple Fitness+. Apple also provides a range of other services, such as AppleCare, iCloud, Apple Card, and Apple Pay.
Apple’s brand has long been synonymous with “high-end” products that cater to high-spending consumers. With a strong jobs market, consumers have higher purchasing power and are inclined to spend more on non-essentials and high-end products.
- Johnson & Johnson
Johnson & Johnson (NYSE:JNJ) is a multinational corporation based in New Brunswick, NJ, that manufactures and sells health-related products and services. It is also one of the world's most valuable corporations, employing more than 140,000 active employees.
JNJ's operations are segmented into three groups:
- Consumer Health: Provides products based on science and approved by medical experts to help people improve their health.
- MedTech: Diverse healthcare expertise and purposeful, innovative technology help save lives and aim to create a future where healthcare solutions are smarter, less intrusive, and more personalized in surgery, orthopedics, and interventional solutions.
- Pharmaceutical: Products distributed through the Janssen Pharmaceutical Companies. Janssen envisions a future in which disease prevention, early detection, treatment, and cure will change thanks to its cutting-edge biologics and other medical components.
JNJ is one of the longest-running companies in the US that have lived through different recessions and grown with outstanding products. A strong jobs market benefits healthcare and pharmaceutical companies as consumers with more spending power tend to buy more vitamins and other healthcare products.
- Final Thoughts
While a strong jobs market benefits the economy and stocks as a whole in general, investors should still conduct their due diligence to ensure that they make informed decisions. Stock prices are affected by different factors, and research on them goes a long way when it comes to preserving portfolio value and returns.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.