Jobless Rate Down, and So's the Dow

WASHINGTON, D.C.: Two days after the Federal Reserve postponed a vote on interest rates pending new information on the health of the economy, surprisingly low unemployment numbers sent the Dow spiraling into its seventh-lowest point drop in history. The government announced Friday that the unemployment rate in June fell to 5.3 percent as businesses added 239,000 workers to the payroll last month. That figure sharply exceeded the expectations of economists and investors. It promptly sent stock prices into a tailspin: the Dow industrials closed 114.88 down at 5,588.14. "Today's numbers were totally unexpected," reports TIME's Bernard Baumohl. "This indicates the economy is stronger and more resilient than investors and economists had thought. Everybody will keep an eye on economic data between now and August 20 to see if the numbers indicate the economy is continuing to grow at a strong pace." The Fed has kept rates steady at 5.25 percent since January, but with the economy growing at an annual rate of about 4 percent last quarter that is likely to change. "The question now is will the Fed raise rates 25 or 50 basis points," Baumohl says. Economists had been predicting the economy would slow down in the second half of the year, but Baumohl points out that few anticipated the rapid growth in the second quarter. "Economists have terribly underestimated the strength and endurance of the this economic expansion," he says. "In the first quarter people were complaining that the economy was growing too slowly. Now it's growing almost twice as fast and some people are concerned it is overheating."