Hiring by U.S. employers slowed significantly in July as the number of new jobs added to payrolls came in far below Wall Street expectations.

The U.S. Labor Department report showed only 32,000 new net jobs added to payrolls during the month, down from a revised 78,000 jobs that were added in June. The increase was the smallest since December, when payrolls rose by just 8,000.

The unemployment rate fell to 5.5%, an improvement from the 5.6% reading in June.

Economists had forecast a 240,000 gain in jobs, and the unemployment rate staying unchanged at 5.6%.

This is the second straight month of jobs growth far below economists’ forecasts, following three months that showed strong jobs growth starting in March. The June report had initially showed 112,000 jobs added, rather the 250,000 forecast at that time.

But Friday’s report missed the target by even a wider margin.

U.S. stocks opened sharply lower on new concerns about the state of the economic recovery.

Meanwhile bond prices soared and yields, which move in the opposite direction, fell amid expectations that the Federal Reserve will not raise interest rates as fast as previously expected. The Fed holds its next meeting to consider interest rates Tuesday.

Allan Seychuk, an economist with RBC Financial Group, said that despite the weaker than expected report, the Fed will like raise rates next week.

“In terms of changing thinking at the Fed, this number will not have the same impact. July’s slow job creation was probably a holdover from June’s pause in growth. Early indicators show the economy picked up again in July
and even leading job market figures from manufacturing surveys and from weekly unemployment claims show that August is shaping up to be a lot better,” Seychuk said.

The jobs report did show some signs of strength. Average hourly wages were up US5¢ to US$15.70, in line with forecasts, and the average hourly work week rose 0.1 to 33.7 hours, which was just below the forecast of 33.8.