Stocks closed lower on Friday to end the week after the latest U.S. jobs reports showed that the labor market remained resilient despite tight economic conditions. This strong data is lowering investors’ hopes for the Federal Reserve to keep interest rates unchanged this month.
The S&P 500 edged 0.3% lower, contributing to a total decline of 1.2% over the course of the week ending Friday 7 July. The Nasdaq Composite Index slid by 0.3% as well, adding to a 0.9% weekly loss. The Dow Jones Industrial Index fell 0.6% for the day.
Friday’s government jobs report exhibited some cracks in job growth, following private reports that exhibited results supporting this finding. As a result, the market is expecting at least one further rate hike this year, having not yet priced a second hike.
“Jobs growth has slowed but remains too strong to justify an extended Fed pause,” Seema Shah, chief global strategist at Principal Asset Management observed. “More significantly, with average hourly earnings surprising to the upside, wage pressures are still too strong. Today’s report will give the Fed little reason to hold off from hiking at the July meeting.”
Jeffrey Roach, chief economist at LPL Financial, expressed agreement with this assessment, going so far as to claim that a Fed rate hike this month is highly probable. Roach added that June’s 0.4% jobs growth shows that the labor market remains resilient, with employers still on the lookout for more workers.