Economy shows signs of slowing; Market gets lift from jobs data
WASHINGTON -- Somewhat subdued job growth and declining hourly wages in July offered the clearest signs yet that the economy is throttling down from the second quarter's torrid pace.</br></br>The financial markets exhaled on Friday, quickly concluding that the Labor Department's benign employment report takes the pressure off the Federal Reserve to raise interest rates at its policy meeting Aug. 20. Stock and bond markets rallied, with the Dow Jones Industrial Average surging 85.08 points, to 5679.83, while the price of the 30-year Treasury bond jumped 1 1/8 points, pushing down the yield to nearly 6.73%.</br></br>Fed Chairman Alan Greenspan told Congress two weeks ago that policy makers were ready to tighten credit to head off inflation unless signs of a slowdown became evident soon. Just in time, that evidence is emerging. The economy added 193,000 jobs in July, much more tame than June's huge gain of 220,000.</br></br>The unemployment rate rose only a tenth of a percentage point to 5.4% of the work force in July, and Fed officials said they're still concerned about labor-market tightness and the prospect that rising wages could drive prices higher. Yet they also said there's scant evidence of this; indeed, the employment report showed average hourly earnings retreated by two cents after shooting up nine cents in June. With inflation stable, the Fed is increasingly likely to stay on the sidelines.</br></br>The report "did much to allay a lot of those fears about an overheating economy," said economist Ken Mayland of KeyCorp in Cleveland. "It makes a good case that things are simmering down some."