Stocks end lower after September payrolls miss, but S&P 500 still

Stocks closed in the red on Friday as investors digested a key report on the labor market’s recovery, which showed a much weaker-than-expected pace of hiring last month. 

The S&P 500 fluctuated between gains and losses throughout the day, trading choppily after three consecutive sessions of advances. The blue-chip index still eked out a weekly gain, however. 

The moves to the upside earlier this week came after Senate leaders said they reached an agreement on raising the government borrowing limit into early December, helping avert a default as soon as this month. The chamber voted Thursday evening to raise the debt limit by $480 billion, and the legislation for the short-term increase now heads to the House of Representatives. 

With concerns over the government debt ceiling pushed off, investors have fixed their attention toward the latest monthly jobs report from the Labor Department. This report showed another miss on payroll gains after a disappointing August print. 

Non-farm payrolls rose by only 194,000 in September versus the 500,000 expected. The unemployment rate fell more than expected to 4.8%, though this positive development came alongside a disappointing drop in the labor force participation rate to 61.6%, versus 61.7% in August. And the size of the civilian labor force actually contracted in September, with the gap between the size of the labor force in February 2020 and last month yawning further to top 3 million. 

Average hourly earnings also accelerated to reach a 4.6% year-over-year rate, or the fastest since February, in another print affirming inflationary pressures taking place across the U.S. economy.

“People are more fixated on the jobs created more than anything else. I think the wages are more important for people who are worried about inflation,” Julie Biel, portfolio manager at Kayne Anderson Rudnick, told Yahoo Finance Live on Thursday. “For us, seeing modest wage inflation is a positive because if you think about the U.S. economy, it’s primarily a consumer economy … so it is a positive for the economy longer-term. But it is a negative for profit margins which have been at all-time highs.”

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Friday’s jobs report stood in stark contrast to other, stronger-than-expected data on the state of the labor market in the U.S. New weekly jobless claims came in at their second-lowest since March 2020 on Thursday, and ADP’s private payrolls report showed a better-than-expected 568,000 job gains in September earlier this week.

Despite the payrolls miss, the September jobs report may have still been enough to trigger the start of tapering by the Federal Reserve, some economists said. Others, however, said the significant headline payrolls miss may give the central bank pause.

“I think people were counting on [a tapering announcement] being November, and I think now that there’s a percentage chance that it won’t be in November now as a result of this data,” Constance Hunter, KPMG chief economist,…