U.S. Job Growth Slumps in July

WASHINGTON -- The United States' payrolls grew by an anemic 32,000 new jobs in July, suggesting the economy is stuck in summer lethargy three months before voters elect a president. The report rattled Wall Street and sent stocks tumbling.

The latest snapshot on employment growth, in a report Friday by the Labor Department, showed the smallest gain in hiring since December. Job gains reported earlier for May and June also were lowered.

"The economy has come close to a standstill this summer," said Mark Zandi, chief economist at Economy.com. "I think businesses' collective psyche is still quite fragile," he said, citing high energy prices, the possibility of terrorism and the Iraq war.

The unemployment rate, however, dipped to 5.5 percent last month, from 5.6 percent in June. The new rate was the lowest since October 2001.

The payrolls figure and the unemployment rate can sometimes go in different directions because they are derived from two separate surveys.

The Federal Reserve is still expected to boost interest rates by one quarter point at its next meeting Tuesday, economists said. But if other economic data suggest the economy is cooling in the current quarter, that would make it less likely there would be further rate increases this year, they added.

On Wall Street, stocks fell sharply. The Dow Jones dropped 147.70 points to 9,815.33, the lowest close this year.

Fed Chairman Alan Greenspan, appearing before Congress last month, acknowledged the economy hit a "soft patch" in June. But he expressed confidence that it would be short-lived.

Friday's payroll figures, however, indicated that the June slowdown wasn't an aberration.

"Clearly the economy is stuck in a soft patch. It is longer than we anticipated," said Wells Fargo's chief economist Sung Won Sohn. Sohn said his projection for economic growth in the July-to-September quarter, now at a high of a 4.5 percent annual rate, will need to be lowered.

Most economists look more closely at the payroll figure as a better barometer of the health of the jobs market than the unemployment rate.

The 32,000 net jobs added in July followed a gain of just 78,000 jobs in June. May's payrolls also were lowered to show an increase of 208,000. The new figures for May and June translated into a combined 61,000 fewer jobs being created in those two months than previously estimated.