By Juli Morris and Charles Thibault on May 15, 2009 in Health Care - XLV.

Click chart to view full size

In the chart to the left, Hiring Demand(the blue line in the chart) for companies comprising the The S&P 500 Health Care Index has moved upward recently, according to the latest WANTED Hiring Demand data.

For the week ended May 2, year-over-year change in Hiring Demand based on online job ads improved from -39 percent the prior week to -29 percent (based on the count of Available Ads). For the same period, yearly returns for the Index were up two percentage points, year-over-year, from the prior week, ending at -26 percent.

The scatter plot chart below compares yearly returns on the S&P Health Care Index, compared to the year-over-year growth in Hiring Demand in the companies making up this index. (The Health Care Index is made up of 54 companies in this sector, and accounts for 13.9 percent of the market capitalization of the entire S&P 500.)

Click chart to view full size

Investors looking for opportunities to profit in this sector can compare Index returns to changes in Hiring Demand on a weekly basis to estimate the structural relationship between Hiring Demand and stock returns, as evidenced by this scatter plot.

Each dot represents a week. If Hiring Demand is strong but Index returns are weak – a point below the fitted line – that can signal a buy opportunity, as returns will have to catch up to hiring demand.

The broader health care sector added a modest 16,800 jobs in April, according to last Friday's BLS preliminary report. WANTED's hiring demand data for the health care industry indicates that new online job ads remain in negative territory, down nearly 27 percent year-over-year.

Comments are closed.