Stocks rose Friday as investors digested a mixed report on the state of the U.S. labor market, with a back-to-back miss on monthly payroll gains serving as potential fuel for policymakers to keep their current support systems in place for longer. 

The S&P 500, Dow and Nasdaq each gained following the Labor Department's May jobs report. Headline non-farm payrolls rose by 559,000, which accelerated from April but still missed estimates for a rise of 650,000. While the unemployment rate fell to a new pandemic-era low of 5.9%, this came alongside a drop in the labor force participation rate, suggesting a smaller share of Americans out of work returned to the labor force to look for or take new jobs. 

Investors may be interpreting the back-to-back miss in job gains as a sign that the economy has not yet recovered enough to warrant a pivot in the Federal Reserve's ultra-accommodative monetary policy stance. Growth and technology stocks outperformed, and the Nasdaq advanced by 1.5% for its best day in two weeks. The S&P 500 ended just a few points below its all-time closing high. 

"What I see here is somewhat of a 'Goldilocks' overall economy. I see that employment is increasing," former Chase Chief Economist Anthony Chan told Yahoo Finance on Friday. "With regard to the reason why the market is excited, it's because that it's telling us that the economy is not blistering hot, that it's actually going to be opening up pretty gradually. I think that's important." 

Still, the economic data overall have been mixed. A stronger-than-expected ADP private payrolls report and weekly jobless claims print on Thursday each underscored firming rehiring trends across the economy, with a smaller share of individuals becoming newly unemployed for pandemic-related reasons. Another wave of vaccinations has taken place, reopenings have picked up, and businesses have been scrambling to bring back workers to keep pace with surging demand. 

"We're entering the boomtown now. We are about to pivot from recovery to expansion in the economy," RSM Chief Economist Joseph Brusuelas told Yahoo Finance. "I think that it's appropriate, members of the Federal Reserve begin to signal to markets that things are not going to be the same forever, that it's appropriate that they begin to think about tapering the pace of asset purchases at the very least, or altering the composition of those asset purchases."

"It does make sense that later this summer, perhaps as early as Jackson Hole, or at the September meeting, we'll get a more definitive forward look from the central bank on the end of those asset purchases," he added.

Still, some Federal Reserve officials suggested they were still inclined to remain on hold. Federal Reserve Bank of New York President John Williams told Yahoo Finance's Brian Cheung on Thursday that the economy was "still quite a ways off from maintaining the substantial further progress we’re really looking for in terms of adjustments to our asset purchase program." However, earlier this week, Philadelphia Fed Bank President Patrick Harker took a different stance, saying "it may be time to at least think about thinking about tapering." 

Meanwhile, the latest meme stock rally of the past week took a breather Friday, with AMC Entertainment (AMC) shares slipping for another day after doubling on Wednesday. Shares of other heavily shorted stocks popular with traders on Reddit, including BlackBerry (BB) and Naked Brand Group (NAKD), also traded with relatively less volatility. Still, many pundits suggested elevated retail trader participation and social media-driven stock trading were here to stay.

"Reddit is not dead and the meme stock theme is not dead, and there is a big powerful audience out there that can still push those stocks around quite a bit," Jim Bianco, Bianco Research President, told Yahoo Finance. "It seems like we're starting to get to the point now where the broader market is starting to notice it again, like it did in late January. And should we continue to see the meme stocks continue to go, maybe a broader systemic problem will become a worry, not a problem, but become a worry like it was in January as well too." 

"I think we're going to have to settle in and realize that this is just the investing environment that we now have in 2021," he added. 

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