Wall Street’s main indexes closed sharply lower on Friday, after strong September employment data raised the likelihood that the Federal Reserve would press ahead with its campaign to raise interest rates that many investors fear will push the economy into recession.
Despite this, the S&P 500 gained 1.5% for the week, while the Dow Jones and Nasdaq gained 2% and 0.7%, respectively.
Standard & Poor’s closed sharply lower on Friday, by 103.90 points, or 2.77%, to close at 3640.62 points. The Nasdaq index lost 418.49 points, or 3.78%, in the last sessions of the week, to record 10654.83 points, while the Dow Jones index fell 620.95 points, or 2.07%, to 29305.99 points.
The US labor market slowed slightly in September in a welcome development in the fight against inflation, but it remained so solid that the unemployment rate returned to the level it was before the Covid-19 pandemic.
And the US Department of Labor announced on Friday that the unemployment rate fell slightly in September, to 3.5 percent, the rate it reached in July and that recorded before the epidemic. This rate had reached 3.7% in August.
Job creation has also slowed. The US economy added 263,000 jobs last month, especially in the entertainment, hotel and health services sectors, compared to 315,000 in August.
Analysts had unanimously expected the unemployment rate to remain at 3.7 percent, which was recorded in August, and expected the creation of between 250 and 275,000 jobs.
US President Joe Biden, whose popularity has declined with rising prices, welcomed the numbers, which he described as an “encouraging indication” that the economy is on the right track, stressing at the same time that more efforts must be made to help American families.
“The job numbers released today are an encouraging indication that we are moving into a phase of stability and steady growth,” Biden said in a tweet, noting that the number of American workers “is greater than ever.”
“More efforts must be made to develop our economy,” he said, adding, “But we are making progress.”
Analysts closely follow the situation of jobs because it is linked to the fight against inflation. Paradoxically, any decline in the labor market is both desirable and expected.
In fact, the labor market has been experiencing tension for more than a year due to the shortage of manpower.
Employers face difficulty in hiring and raising salaries to attract candidates and retain their employees, which contributes to raising prices.
Presenting a monthly investigation into creating jobs in the private sector, Nella Richardson, chief economist at IDP Business Services, said Wednesday that “demand from employers remains strong and (labor) availability is improving from workers at the moment.”
In August, the unemployment rate rose slightly to 3.7 percent, after returning to its pre-pandemic level, which was the lowest in more than fifty years.
However, this obscured the good news represented in the return of a large number of those who left the labor market due to Covid, especially women.
The US Federal Reserve is making efforts to curb inflation. It raises interest rates to slow the economy by discouraging consumption and investment. But it risks causing a recession.
The September job creation numbers match expectations.
Christopher Waller, one of the Federal Reserve’s governors, said Thursday that a level of this kind would show that “the labor market is slowing down a bit but remains tense,” and this reinforces his view that the Fed should “focus 100 percent on reducing inflation” and thus continue to raise interest rates. .
Also, Lisa Cook, a Federal Reserve governor, warned that “policy must remain focused on restoring price stability, which will also lay the foundation for a strong and sustainable labor market.”
In Europe, stocks fell sharply, on Friday, after data indicating strong employment growth in the United States reinforced the argument of the Federal Reserve (the US central bank) to continue to raise interest rates by large percentages in its effort to curb inflation.
The pan-European Stoxx 600 index fell 1.2% in the weekend’s session, marking the third consecutive session of losses.
The US jobs data came on the heels of the publication of the minutes of the European Central Bank’s latest meeting, on Thursday, which fueled fears of a sharp interest rate hike to contain hyperinflation in the euro zone.
But the pan-European Stoxx 600 index achieved a weekly gain of about 1%, as expectations that major central banks might calm a little from the approach of tightening monetary policy contributed to boosting stocks in the first few sessions of the week and pushed the index to the best weekly performance in a month.