WASHINGTON (AP) - The nation's jobless rate dropped to 4.8 percent in July, matching a 24-year low. President Clinton claimed credit from the Rose Garden, but Wall Street worried an overheated economy will push inflation higher.
"The strategy of balancing the budget, while investing in our people and selling more American products around the world, has helped to produce sustained prosperity for Americans," Clinton told reporters.
Financial markets didn't share the euphoria. A late-July rally, which had carried the Dow Jones average of industrial stocks to six records in seven sessions, fizzled for a second day Friday.
The Dow average finished down 28.57 points to close at 8,194.04, mostly recovered from a 120-point slide. It rose to a record 8,254.89 on Wednesday, up nearly 30 percent since mid-April and almost 7 percent in July alone.
The bond market didn't recover. As demand weakened, the yield on the benchmark 30-year Treasury bond shot to 6.46 percent, up from a 17-month low of 6.29 percent the day before.
"Probably the summer rally is behind us, at least for now," said economist Sung Won Sohn of Norwest Corp. in Minneapolis. "Financial markets have probably been overly optimistic. ... Today they're waking up. Times are good, but not that good."
The unemployment report showed wage growth stalled in July. Average hourly earnings were unchanged at a seasonally adjusted $12.23. But sooner or later, the scarcity of qualified workers has to put upward pressure on wages, eventually forcing companies to raise prices, Sohn said.
"I don't see any major acceleration (of inflation) but probably the best news is behind us," he said.
With inflation at bay, the Fed has left short-term interest rates unchanged since March. Sohn said policy-makers probably will leave them on hold at their Aug. 19 meeting. But now there's a 50-50 chance they'll raise them at their Sept. 30 gathering, he said.
The July jobless rate marked a decline from 5 percent in June and matched the May rate. It hasn't been lower since November 1973. Businesses added 316,000 jobs, roughly 100,000 more than economists predicted, after a gain of 228,000 in June.
"The job market ... is the tightest it has been in decades. It is by and large a sellers market and I think American workers haven't quite figured that out yet in terms of their wage demands," said economist Allen Sinai of Primark Decision Economics.
Meanwhile, a report from the National Association of Purchasing Management showed manufacturing expanded in July to the healthiest level in nearly three years. The association's index of business activity rose to 58.6 percent from 55.7 percent in June.
Analysts said that's a sign the economy is rebounding after a slowdown that cut growth from a robust 4.9 percent annual rate in the first quarter to a mild 2.2 percent in the second.
Meanwhile, the Commerce Department said Americans' income grew 0.6 percent in June, the largest in three months. Their spending increased by 0.3 percent for the second straight month.
It also said orders to U.S. factories in June increased 1.2 percent, the second gain in three months.
July's employment gains were concentrated in services, retail trade and teaching. Health services rose by 31,000 jobs and growth was quite strong in engineering and management services and computer services. Retailers added 65,000 jobs.
Local education accounted for almost the entire increase of 56,000 government jobs, but the gain may be explained by difficulties in adjusting the statistics for seasonal hiring swings.
Manufacturing jobs fell by 5,000 and construction rose 3,000.
Among demographic groups, July unemployment was 4 percent for men, 4.2 percent for women, 16.4 percent for teen-agers, 4.2 percent for whites, 7.9 percent for Hispanics and 9.4 percent for blacks.
Average hours worked per week fell from 34.7 to 34.4. The factory work week and factory overtime declined for the third consecutive month.