Stock averages up 0.4% despite weak jobs data

U.S. stocks ended higher Friday as traders examined a critical monthly report on job growth that could carry implications for Federal Reserve policy.

The Dow Jones industrial average, S&P 500 and Nasdaq composite each climbed 0.4%. For the Dow, that translates to a 73-point gain.

The jobs report is particularly crucial because the Federal Reserve is closely examining economic data for guidance as it sets interest-rate policy. The report estimated August growth of 151,000 jobs and the unemployment rate flat at 4.9%. On average, economists surveyed by Bloomberg were projecting growth of about 180,000 jobs in August and an unemployment rate of 4.8%.

"This was a good report from a risk-asset perspective, although a bit weak from an economic perspective," said Mike Baele, senior portfolio manager at U.S. Bank's Private Client Reserve, in an interview. "However, it wasn't so weak that it's going to cause a lot of worry that the economy is decelerating."

Slowing job growth in Aug. lowers odds of Sept. rate hike

Analysts said a strong jobs report could pave the way for a rate increase as early as this month, while a weak report could delay it to December or longer. The actual numbers were somewhere in between, though lower than expected. It was more sluggish than June and July but better than May.

“Mediocre jobs gains in August and few conclusive signs of any acceleration in inflation strongly suggest that the Fed will not increase the federal funds rate at the” Fed meeting in September, IHS Markit chief economist Nariman Behravesh said in a research note. “Other recent data have also been somewhat mixed. The most likely timing of the next rate hike is in December — after the presidential election.”

Baele said that as the economy heads toward full employment, the next step will be to wage for wage growth. At 0.1% in August, that figure disappointed.

The yield on the 10-year Treasury note rose to 1.60% from 1.57% Thursday.

Energy stocks got a boost as oil prices rallied. The price of West Texas Intermediate crude oil, the U.S. benchmark, rose 3% to $44.44.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.