Stocks Boomerang On Job Increase

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WASHINGTON, D.C.: Even as President Clinton was proudly taking credit for a sharp increase in new jobs reported Friday morning, investors were panicking. The Dow Jones plummeted by more than 85 points in the first half hour of trading on fears that the Federal Reserve would boost interest rates to ward off inflation. (The market rebounded later in the day, closing up nearly 30 points.) Labor Secretary Robert Reich, whose department released the new figures, criticized Wall Street's dim view: "This isn't the first time that Main Street has celebrated, and Wall Street has despaired. I don't see any signs of accelerating inflation." The Labor report shows that jobs swelled by 348,000 last month, twice the number expected. It was not the first positive employment report to cause sharp drops in the stock market, notes TIME's Economics correspondent Adam Zagorin. "Investors have been worried all year that the Federal Reserve would raise interest rates," says Zagorin. The Fed did not raise rates after the other upticks in jobs, he says, nor is there any indication they will this time. Even so, a growing number of leading economists are convinced that the Fed will hike the rates sometime soon. Between July 1995 and January 1996, the top bank cut interest rates three times, fearing that a weak economy could lead the nation into a recession. As the economy continues to grow, the Fed's trigger finger has got to be getting itchy. Lamia Abu-Haidar