When is the last time you heard an unequivocally good jobs report?
Unfortunately, most of us are probably still scratching our heads trying to remember. The latest report from the U.S. Department of Labor wasn’t great. The unemployment rate held steady at 7.3%. The labor force participation rate was only 63.2% — the lowest it’s been in 35 years. Despite the continued cloudy job numbers, there actually is one consistent silver lining. And it’s in health care.
The August jobs report showed two areas with solid increases in employment: retail and health care. However, the retail sector hasn’t exhibited the steady strength of health care. There have been more health care jobs added to the economy every month for the last decade. That’s right — the last month with fewer health care jobs than the prior month occurred in July 2003.
There have been a few close calls along the way. July of this year was the slowest-growing seasonally adjusted month for health care jobs in 10 years with only 2,500 new jobs. However, August saw a big rebound with nearly 33,000 more jobs added in the sector.
Ambulatory care, which includes outpatient care settings such as physician offices, clinics, and home health, has kicked in the most growth recently. This area added nearly 27,000 jobs last month.
Health care workers generally view the job outlook better than those in other sectors. A recent survey conducted by Harris Interactive for Randstad Healthcare found that a majority of employees with health care jobs felt confident that they could find a new job in the next 12 months if they wanted to do so.
More than 60% of these workers, though, expressed confidence in the future of their employers. That could mean that most don’t want to change jobs even if they think they could.
Silver lining playbook
Continued strength in the health care job market is great if you’re in it, but how does that help other Americans? If you’re an investor, you could potentially still make money from the trend even if you don’t work in health care.
Home health companies have been hiring away with around 8% job growth so far in 2013. Does this mean that home health stocks could be smart investment alternatives? Perhaps.
Amedisys Inc (NASDAQ:AMED) shares are up more than 50% year-to-date after a solid second quarter and help from Kohlberg Kravis Roberts & Co., which bought an 8% stake in the company. However, Amedisys now trades at a forward price-to-earnings multiple of almost 38. That’s quite pricey for a home health stock.
Some of Amedisys Inc (NASDAQ:AMED)’ competitors are cheaper — but they’re not generating the buzz that Amedisys did, either. Gentiva Health Services, Inc. (NASDAQ:GTIV), for example, is up around 10% in 2013 so far. The Atlanta-based home health company claims a forward P/E multiple of 11.
One underlying driver behind the current job growth in health care comes from the approaching deadline for providers to convert to a new billing coding system known as ICD-10. This implementation was originally scheduled for Oct. 1 but was delayed by one year. Many health care providers are scrambling to finish in time.
3M Co (NYSE:MMM) is the leader in computer-assisted coding to help providers with their ICD-10 implementation. The problem with going with 3M as an investing play on health care’s strength, though, is that the company is so big. 3M’s Health Care business segment accounts for only around 17% of total revenue.
Perhaps a better angle would be to go with systems vendors that stand to gain as health care providers convert to ICD-10. Cerner Corporation (NASDAQ:CERN) looks like a good pick on that front. Earlier this year, KLAS Research identified the health care technology company as one of the most prepared for ICD-10. Cerner’s stock is up around 22% year-to-date and was up by 30% prior to the recent overall market pullback.