Finimize - 🤨 Jobs slump

What’s going on here?

US job growth slumped to a four-year low in October, as two devastating hurricanes and a major labor strike hampered hiring efforts.

What does this mean?

The world’s biggest economy created just 12,000 new jobs in the month, a sharp fall from the 223,000 in the month before, and well short of the 118,000 economists were expecting. And though the figure was startlingly low, the situation may not be quite as dire as it seems. The two back-to-back hurricanes and Boeing’s ongoing work strike stood in the way of companies’ efforts to hire – while also complicating the task of predicting the month’s job creation figures. Plus, the country’s wage increases remained strong at an annual 4% and the unemployment rate held steady at 4.1%, as expected, suggesting that the job growth engine isn’t yet out of steam.

Why should I care?

For markets: Balancing acts.

The Federal Reserve (Fed) has two jobs: maintaining price stability and maximum employment. And with inflation seemingly in hand, its eyes are firmly fixed on the labor market. That led the Fed to snip interest rates by a hefty half-percentage point in September. Now, a gentler quarter-point cut is expected next week – and with all the unusual one-off factors in this latest payrolls report, the data seems unlikely to change that view.

For you personally: The Fed’s limits.

The Fed sets short-term interest rates, but investors determine prices and yields on bonds – like the 10-year Treasury – and those are used to determine your mortgage rate. When the Fed cut rates in September, the return on the 10-year bond was around 3.7%. But a stronger economy and worries about higher public debt have since lifted the yield on 10-year to 4.3% – its highest since July. And that’s sent mortgage rates higher.

What’s going on here?

ExxonMobil and Chevron exceeded earnings expectations, delivering some lively third-quarter earnings.

What does this mean?

Exxon and Chevron both look like they’ve been running on some kind of high-octane, racecar fuel. A boost in their US-based output helped offset lower oil prices, enabling them to post impressive results. Exxon used the opportunity to sweeten the deal for shareholders, increasing its quarterly dividend. It’s a favor the firm’s now well-known for: Exxon has increased its annual payout for shareholders every year since the early ’80s. The oil and gas giant also announced that it would use its titanosaur-sized, $27 billion cash reserve to navigate future swings in the commodity market. Chevron, meanwhile, said it’s been improving the look of its books by selling assets, as it stares down some cash flow challenges. The company’s been clipping its coupons and its costs, and that’s helped it deliver a strong quarterly result.

Why should I care?

The bigger picture: Not all energy is equal.

Exxon is the biggest oil producer in the US and, with its 20% total returns this year, it’s the envy of its energy peers – who average just 8% between them. They are, after all, part of this year’s worst-performing US stock sector. But it’s not all energy that’s out of fashion these days: utilities are the best-performing sector in the S&P 500, with zero-emission nuclear suddenly back in vogue. It’s enjoying a renaissance, propped up by Big Tech’s massive AI data center power needs and its strict carbon emission targets.