Employers added just 32,000 workers to payrolls last month, a surprisingly weak number that led Wall Street to fret about second-half economic growth and to expect a slower pace of interest-rate rises.

The Labor Department (search ) on Friday also cut its tally of job growth in May and June by a combined 61,000, adding to the soft tenor of a report that came as unwelcome news for an election-bound President Bush.

"It's a huge disappointment, a big surprise," said Scott Brown, chief economist at Raymond James in St. Petersburg, Fla. "It implies a very sharp revision to the overall outlook for the economy."

Stock prices fell, with the blue-chip Dow Jones industrial average off about 90 points early afternoon, while bonds surged and the dollar tumbled as traders saw the report ensuring the Federal Reserve (search ) would tread a careful path on raising rates.

While the Labor Department survey of employers showed job growth had all but stalled, its separate poll of households showed a jump in employment, pushing the unemployment rate to a more than 2-1/2 year low of 5.5 percent in July from 5.6 percent in June.

Treasury Secretary John Snow (search ) seized on this number as a bright spot, but the Labor Department cautioned that it was drawn from a smaller and less reliable survey.

Economists said the data, coming only days before the Fed's next policy meeting, showed the economy had yet to gain much momentum after a speed bump in June. Expectations on Wall Street had centered on a 228,000-job gain.

Fed officials were certain to parse the data closely at their meeting on Tuesday, but analysts said they were still likely to bump overnight interest rates up a notch.

The bigger question seemed to be what happens next.

"We still think that the Fed will raise rates next week, but the case for moving slowly and deliberately is strengthened by this report," said Patrick Fearon, an economist at A.G. Edwards and Sons in St. Louis.

Analysts said the report would likely prove troubling for Bush, who is locked in a close battle for the White House with Democratic Sen. John Kerry in which the economy, and job creation in particular, are in the spotlight.

The Bush administration highlighted the creation of 1.5 million jobs in 11 straight months of hiring gains but admitted more needed to be done.

"We're not satisfied," Snow told reporters in Pittsburgh. "We're encouraged, though, by the fact that the unemployment rate came down."

Democrats emphasized the weakness of the numbers and pointed to a net loss of 1.1 million jobs since the president took office.

Kerry said the data belied Bush's claim that America's economy is "turning the corner."

"The president keeps saying we've turned the corner. But unfortunately, today's job numbers further demonstrate that our economy may be taking a U-turn instead," the Democratic presidential contender said in a statement.

Job growth has continued to lag rosy administration projections made earlier this year.

Economists say payrolls are notoriously hard to forecast with precision, in part because monthly changes amount to a fraction of total employment of some 131 million workers. From February to July, five of the monthly payrolls changes have fallen outside the full range of analysts' forecasts.

Some economists said the report showed businesses were holding off on hiring in the face of surging oil prices and uncertainty caused by the potential for terror attacks and the looming U.S. elections.

Crude oil (search ) costs recently have been pushing into record high territory on an almost daily basis on strong demand and concerns about global supply.

The government said last week the economy advanced at just a 3 percent annual rate in the second quarter, a sharp slowdown from its heady 4.5 percent first-quarter clip, but fresher data had led many to think the pace of growth quickened last month.

However, some economist said the jobs report called this into question.

Manufacturers added a meager 10,000 workers in July, after cutting a revised 1,000 from their payrolls in June. The Labor Department said a loss of 21,000 transport equipment positions was caused by to big retooling shutdowns at auto plants.

Construction firms added just 4,000 new workers.

The service side of the economy put in a poor showing as well, creating only 14,000 new jobs. Employment at financial firms plummeted, with big losses at mortgage brokers some economists said could be tied to rising interest rates.