What PMI Data Says About the NFP Report: 3 Hidden Opportunities

Key Points

• The recent NFP jobs report shows a completely different reality than what this other important report suggests. The last time this happened, jobs were revised lower.
• A divergence in full-time to part-time jobs would lead investors to examine these three areas for upside.
• Warren Buffett and Goldman Sachs are already positioned in these asset classes, expecting higher prices.

The stock market took a big swing last Friday, January 10th, mostly unexpectedly after the United States released one of its most important reports regarding the labor market and its current state. The Non-farm Payrolls report (better known as NFP) is one of the numbers that is closely watched by the Federal Reserve today. The Fed is awaiting further employment and inflation data to decide where interest rates should be headed.

As it turns out, the NFP report blew out of the consensus by nearly 100,000 jobs, which sent the SPDR S&P 500 ETF Trust NYSEARCA: SPY selling off significantly. A hotter labor market would eliminate the need for the Federal Reserve to entertain further interest rate cuts. The only issue is that another significant report, the manufacturing and services PMI, shows a completely different story.

Investors will soon find out why this recent NFP report was not as good as it was made out to be, as most jobs ended up in the financial sector as well as the retail industry due to seasonal reasons, meaning the recent dips in assets like bonds can be bought through the iShares 20+ Year Treasury Bond ETF NASDAQ: TLT, or the potential rally in dividend stocks through the Schwab US Dividend Equity ETF NYSEARCA: SCHD, and finally even tap into the energy sector through the Energy Select sector SPD Fund NYSEARCA: XLE.

NFP Did Not Reflect Real Economic Growth

There’s a big difference between part-time and full-time jobs since the latter represents actual economic growth and a need for businesses to cater to increasing demand. While also healthy, part-time jobs can act as a band-aid to potential slowdowns in the labor market, which is what the PMI data shows.

For the manufacturing sector, investors can see a 28 consecutive month contraction in employment, meaning no jobs really came from the full-time nature of industrial and manufacturing positions. Only a few industries reported some growth in the services sector, but investors need to read between the lines here.

With jobs going into the finance industry, after contacting the company for the past quarter, investors can align the sudden bottom and rebound in shares of H&R Block Inc. NYSE: HRB with this employment increase. The reason is seasonal work because of tax season, as accountants and other finance professionals will be hired for these tasks.

Another industry with expanding employment was the accommodation and leisure industry, which is also undergoing seasonality due to Christmas and New Year’s, which is not something that investors can count on moving forward. Knowing that manufacturing had a contraction in employment, and services only added part-time and seasonal jobs, where does that leave the economy?

The answer is at the mercy of another downward revision, such as the 818,000 jobs erased from the NFP in August of 2024. As part-time jobs make up a larger share of the NFP compared to full-time jobs, the economy is setting itself up for another downward revision, which means investors should consider buying into the following areas.

Goldman Sachs & Warren Buffett Agreed on One Thing

In their latest 2025 macro outlook report, Goldman Sachs recommended that investors consider holding commodities in their portfolio this year, not just any commodity. Their preference for oil was made clear, similar to Warren Buffett's message, as he bought up to 29% of Occidental Petroleum Co. NYSE: OXY in recent quarters.

More than that, hedge funds are also starting to pile up positions in oil futures. This way, investors can safely assume that the so-called “Smart money” is betting on higher oil prices. But that’s not the only place where this money is flowing; there’s more than just the energy ETF for investors to consider.

After a brief sell-off on the NFP report, bond prices swiftly recovered to end Friday’s trading session with enough volume to make investors think some willing buyers were just waiting for such an opportunity to pile in. Now, the bond ETF would suffice to ride this wave higher, as Goldman Sachs has also recommended bonds.

But there’s an implication beyond higher bond prices. Investors should remember that higher bond prices bring lower bond yields. When yields, in general, come down, those focused on investing for income will naturally look to attractive alternatives, and that’s where this dividend stock ETF comes into play.

The Schwab US Dividend Equity ETF now offers shareholders up to $2.56 in dividend payouts per share, which translates to an annual dividend yield of up to 9.5%.

This beats inflation and allows investors to cushion any potential volatility that might come from another round of downward job revisions.