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• The US economy added more jobs than expected in October
• Exxon Mobil and Chevron matched oil companies BP and Shell in reporting steep third-quarter profit drops

America Works

What’s Going On Here?

The US voted to work in October: the economy added 128,000 jobs last month, according to data released on Friday. That’s more than economists predicted, and more than they were entitled to.

What Does This Mean?

Worker strikes at automaker General Motors, as well as the dismissal of some temporary staff working on the forthcoming US Census, would’ve caused employment figures to shrink somewhat. But hiring in service industries like hospitality and leisure, education, and professional services (i.e. accountants and lawyers) more than made up for the decline. The official estimate for job growth in September was increased too.

Those are good signs for the US economy. Consumer spending was to thank for higher-than-expected economic growth last quarter, and with workers getting paid 3% more on average over the last year, their spend-happy ways may yet continue this quarter.

Why Should I Care?

For you personally: More than yer jobsworth. 
Some economists reckon the current “tight” US labor market – one where it’s hard to find workers – is to thank for higher-than-expected job additions. Companies might be loath to let employees go because, should the current economic slowdown expectedly pick back up, it’ll cost more time and money in the long run to tempt workers to switch roles.

The bigger picture: Employment and inflation go hand in hand.
Two of the US Federal Reserve’s main responsibilities are promoting “maximum” employment and stable prices. And in a sense, those responsibilities are two sides of the same coin. Lower interest rates encourage more spending (by making saving less rewarding) and the subsequent demand for products might push their prices up. But so too might maximum employment, when companies try to lure employees into new roles – or keep them in existing ones – by doling out pay rises, and those employees can therefore spend more, all else equal.

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Check The Drip

What’s Going On Here?

US oil majors Chevron and Exxon Mobil reported third-quarter results late last week, following European rivals BP, Total, and Shell. And despite falling profits, all but Chevron were drippin’ in finesse.

What Does This Mean?

It’s no secret that the price of a barrel of oil is lower now than it was this time last year. So when oil companies extract it at roughly the same cost as last year but sell it on at a lower price, it’s only natural they’d make less profit. But some of the world’s largest oil companies – known as “integrateds” – do a bit of everything: oil exploring, producing, and refining (turning crude oil into usable stuff like plastics). Their earnings, then, are at least partially hedged: when they’re making less from oil sales, they can buy oil to refine at lower prices to boost that segment’s profit (tweet this). So even though Exxon’s profit was 50% lower than a year ago, it beat investors’ expectations. Chevron’s only fell 36%, but that was a bigger drop than forecast.

Why Should I Care?

For markets: It’s a buyer’s market.
A month ago, industry analysts were predicting oil companies’ third-quarter profit would be 30% lower than a year ago. That forecast’s since fallen further. Given the vast sums oil companies spend on looking for and extracting oil, prolonged profit drops could put their high dividends and share buybacks at risk – and tempt investors to look for a change. On the other hand, analysts expect utilities companies – buyers of energy – to have grown their profits by 6% last quarter. That might be thanks to their customers’ consistent need for gas and electricity, no matter the state of the economy.

The bigger picture: Competition for capital.
The world’s most profitable company, Saudi Aramco, will likely have completed its initial public offering next month, meaning investors will be able to buy and sell its shares on the stock market. They’ll be comparing it to the current – ahem – oil field, and may look to sell shares of some in order to make room for Aramco in their portfolios.

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