Stock prices closed lower Friday in moderate trading after the February report on U.S. employment led to another case of the jitters about the outlook for inflation and interest rates.

The Dow Jones industrial average, which fell 4.11 Thursday, declined 9.29 to 2282.14. For the week, however, the blue-chip index gained 7.85 points.Broader-market indicators also retreated. The New York Stock Exchange composite index declined 0.51 to close at 164.85. Standard & Poor's 500-stock index fell 1.05 to 292.88. The price of an average share lost 10 cents.

Declines led advances 833-599 among the 1,932 issues crossing the New York Stock Exchange tape. Big Board volume slowed to 143,160,000 shares, compared with 167,620,000 traded Thursday.

Analysts said the decline was caused by investors' disappointment over the February employment data, which showed that the jobless rate dropped to 5.1 percent in February, the lowest level since May 1974.

Wall Street observers also cited futures-related selling and weakness in bond prices as factors behind the retreat, although late-afternoon buying helped the market recoup some of its earlier losses.

The Labor Department, which issued the employmemt data at 8:30 a.m. EST, said the 0.3 percentage point drop in the jobless figure reflected the creation of 289,000 non-farm payroll jobs.

The gain in the non-farm sector was considered a healthy increase that reflected a robust economy, especially in light of the revised 415,000-job increase in January, which was originally reported as 408,000.

Job-creation figures in recent months have become one of the most accurate signs of economic health. In reaction to rapid growth in the economy, the Federal Reserve Board has been boosting interest rates over the past year in an attempt to slow things down and fight inflation.

Larry Wachtel, market analyst with Prudential-Bache Securities Inc., said the market's decline was a "direct response" to the employment data.

"The Street bets on those numbers and the numbers were too strong," he said. "We're in the `good news is bad news' mode. Anything that adds to the possiblity of rising rates is bad for the Street."

Forecasts had called for the February data to show a gain of between 220,000 to 270,000 in new non-farm payroll jobs and a one-tenth of a percentage point drop in the jobless rate to 5.3 percent.

The economy is "certainly percolating along and needs restraining," Wachtel said. "There is no sense that rates will go lower."

Harry Miller, portfolio analyst with Interstate-Johnson Lane Corp. in Atlanta, said the employment report troubled portfolio managers, who are facing key investment decisions as the end of the quarter draws near.

"We're at that period where we have a lot of portfolio window dressing, but there's a lot of confusion around. The report renewed concerns about inflation and interest rates." he said.

As a result of those concerns, "many investors will be spending the weekend reassessing the job figures before they make any further moves," he added.

On the trading floor, USF&G Corp. was the most active NYSE issue, rising 1/8 to 321/2. The stock goes ex-dividend Monday.

Upjohn Co. followed, dropping 1/8 to 291/4. Recent New York State regulations on prescriptions for certain tranquilizers are expected to hurt sales of two of the company's biggest selling drugs.

American Express was third, falling 5/8 to 30.

AT&T ended unchanged at 301/2. IBM fell 3/8 to 1181/4.

Among other blue chips, General Motors fell 3/4 to 843/4, General Electric eased 1/2 to 45, Merck dropped 3/8 to 641/8, Exxon slid 1/2 to 441/2, and McDonald's fell 1/4 to 505/8. Union Carbide, however, tacked on 1/4 to 31.

Prices closed lower in moderate trading on the American Stock Exchange.

The Amex Market Value index fell 0.44 to 328.92. The price of an average share lost 1 cent. Declines led advances 312-274 among the 842 issues traded. Volume totaled 12,194,340 shares, compared with 13,440,000 shares traded Thursday.

Amdahl led the Amex issues, rising 1/4 to 173/4.

Despite weakness in the other markets, the National Association of Securities Dealers composite index climbed 0.23 to close at 405.90.