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U.S. stocks fell and Treasury yields rose Friday after the government reported that employers unexpectedly added 162,000 jobs last month, a development that could increase chances that the U.S. central bank will raise interest rates later this month.
The S&P 500 fell 0.4%, though it managed to eke out a modest gain for the week. The Dow Jones Industrial Average fell 0.5%, and the Nasdaq composite gave back 0.3%.
Wall Street expects the Federal Reserve to raise interest rates before the year ends in an effort to cool inflation, which has been running hot due to rising oil prices amid the U.S. war with Iran and remains well above 3%. The Fed has a stated goal of cooling inflation to a target of 2%.
The surprise increase in hiring last month could give the central bank’s policymakers leeway to raise the Fed’s benchmark short-term interest rate to fight inflation at their next policy meeting in less than two weeks.
“Today’s jobs report does lean toward the Fed increasing rates,” said Terry Sandven, chief equity strategist at U.S. Bank Asset Management Group, noting, however, that a rate hike is “not a foregone conclusion.”
The Labor Department reported that hiring in August far exceeded the 65,000 forecasters had expected, according to a poll by FactSet. Labor Department revisions also looked good, adding 55,000 to June and July payrolls. The unemployment rate held steady at 4.1%.
The stronger jobs market could make matters more complicated for the Fed, which has to balance supporting job growth with fighting inflation. Raising interest rates can help tame inflation, but it can also slow economic growth as borrowing costs rise for households and businesses.
Expectations for a rate hike in September increased to 60.4% on Friday following the release of the jobs report, up from