By Jeannine Aversa
The Associated Press

WASHINGTON - America's payrolls grew by an anemic 32,000 new jobs in July, suggesting that 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 statistical 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 that 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 industrials dropped 147.70 points to 9815.33, the lowest close this year.

Analysts were expecting the economy to add anywhere from 215,000 to 247,000 jobs in July. They were predicting the jobless rate would hold steady at 5.6 percent.

Still, July was the 11th month in a row that the economy added jobs. Employment gains during that period total 1.5 million jobs.