NEW YORK – A drop in the unemployment rate to a two-year low sent stocks higher Friday.
The Labor Department said the unemployment rate fell to 8.8 percent, the lowest since March 2009, as companies added workers at the fastest two-month pace since before the recession began. Approximately 216,000 new jobs were created last month, offsetting layoffs by local governments. Economists had expected the unemployment rate to remain at 8.9 percent.
“We are clearly seeing a breakout in the labor market,” said Paul Zemsky, the head of asset allocation at ING Investment Management. “The jobless recovery is ending and we are moving into a job expansion stage of the economy.”
The report helped send the Dow Jones industrial average to a new 2011 high during early trading. Stocks then pared those gains in the afternoon as oil prices hit new 30-month highs. Crude oil jumped $1.22 to settle at $107.94.
The Dow’s 100-point gain early in the day seemed unwarranted because the employment report was just slightly better than expected, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “There’s a relief that the job gains were continuing, but it’s not a huge surprise,” he said. “It’s worth maybe 40 points on the Dow.”
Stocks rose across the market. Eight of the 10 company groups that make up the S&P 500 index moved higher, led by a 0.9 percent rise in industrials shares.
The Dow rose 56.99 points, or 0.5 percent, to 12,376.72. The average of 30 large company stocks gained 1.3 percent for the week.
The Dow has already risen 6.9 percent this year. That’s the best start since 1999.
The Standard & Poor’s 500 index rose 6.58, or 0.5 percent, to 1,332.41. The Nasdaq composite rose 8.53, or 0.3 percent, to 2,789.60.
All three indexes made gains for the second week in a row. The S&P 500 rose 1.42 percent and the Nasdaq 1.7 percent.