Stocks jumped in light trading Friday after the US government reported that the pace of job losses slowed in August to the lowest level in a year.
The Dow Jones industrial average gained 97 points to halve its loss for the week after the Labor Department said employers cut fewer workers last month. However, the report also showed that the ranks of America's
unemployed swelled to 9.7 percent, the highest level since June 1983.
Analysts had been expecting the rate to increase to 9.5% after unexpectedly dipping in July. The increase initially spooked the market, but stocks later recovered their losses and moved higher. Many economists expect the rate to top 10% by early next year.
Employers cut 216,000 jobs last month, fewer than the 276,000 lost in July and better than the 225,000 figure analysts had been expecting. Traders said it was an encouraging sign that the labor market could righting itself.
Unemployment is widely seen as the US economy's biggest hurdle to recovery, and concerns about it have been weighing on the stock market. As long as job losses remain high, consumers could hold off spending money, which the American economy badly needs to resume growth.
Analysts said that the thin trading volume before the long holiday weekend made it difficult to conclude that a shift in investor sentiment was occurring. Markets will be closed on Monday for Labor Day.
The Dow rose 96.66, or 1%, to 9,441.27. The Standard & Poor's 500 index rose 13.16, or 1.3%, to 1,016.40, while the Nasdaq composite index added 35.58, or 1.8%, to 2,018.78.
For the week, the Dow lost 103 points, or 1.1%. The S&P 500 index lost 1.2% and the Nasdaq slipped 0.5%.
The Chicago Board Options Exchange's Volatility Index - known as the market's "fear index" - fell 6.8% to 25.3. It's down 36.9% in 2009 and its historical average is 18-20. It surged to a record 89.5 in October at the height of the financial crisis.
Analysts said a test of the market will come later in the month as traders return from vacation and raise more questions about whether investors have bet too soon the economy's ability to recover.
In downturns in the past 60 years, the S&P 500 index has reached a bottom an average of four months before a recession ended and about nine months before unemployment reached its peak. The index, which is the basis of many mutual funds, hit a 12-year low in March.
Productivity - the amount of output per hour of work - rose at an annual rate of 6.6% in the April-June quarter, the Labor Department said. That's the largest advance since the summer of 2003. And it's slightly better than the 6.4% productivity increase the government had estimated last month.
At the same time, labor costs fell at an annual rate of 5.9% - the sharpest drop since 2000 and slightly more than the 5.8% drop estimated a month ago.
Germany's DAX was up 56.03 points, or 1.1%, to 5,357.45, while Britain's FTSE 100 rose 51.85 points, also 1.1%, to 4,848.60. France's CAC-40 gained 25.32 points, or 0.7%, to 3,578.83.
Hong Kong's Hang Seng index jumped 556.94 points, or 2.8%, to 20,318.62, and mainland China's Shanghai Composite index climbed 16.58 points, or 0.6%, to 2,861.61 after surging 4.8% Thursday.
Japan and South Korean stocks slipped. Tokyo's Nikkei 225 index declined 27.53 points, or 0.3%, to 10,187.11, while the Kospi dipped 0.3% to 1,608.90.
The 16-nation euro edged up to $1.4273 from $1.4213 it bought late Tuesday, while the British pound rose to $1.6279 from $1.6161. The dollar fell to 92.15 Japanese yen from 92.95 yen.
In other late trading, the US dollar rose slightly to 1.1060 Canadian dollars from 1.1049 late Tuesday, but fell to 1.0604 Swiss francs from 1.0662 francs.
Gold for December delivery finished the week at $996.70 an ounce on the New York Mercantile Exchange, up 4% over five days.
Light, sweet crude for October delivery fell 6 cents to $68.02 a barrel. Oil prices closed the week down about $5 as the summer driving season comes to a close with the Labor Day weekend.
Gasoline futures fell 1.65 cents to $1.7763 a gallon, while heating oil futures fell 1.45 cents to $1.7205 a gallon.
Grain prices slipped on the Chicago Board of Trade.
December wheat futures fell 7 cents to $4.7175 a bushel, while corn for December delivery shed 9.5 cents to $3.0625 a bushel.
November soybeans lost 19.5 cents to $9.22 a bushel.