WASHINGTON (AP) – Job growth slowed nearly to a crawl in May, with new hiring registering the smallest gain in almost two years. The unemployment rate dipped to a low 5.1 percent, however.

The latest employment snapshot, released by the Labor Department on Friday, kept up the recent pattern of choppy job creation. Employers boosted payrolls by just 78,000 after a hiring spurt of 274,000 in April.

Economists offered a variety of reasons for May’s moderation: the toll of high energy prices squeezing bottom lines, companies reducing production to work off excess goods on shelves and backlots, cool weather and a statistical payback after the strong job figures in April.

Job cuts last month were reported in categories including manufacturing, leisure and hospitality, accounting and bookkeeping and temporary help. Those losses tempered gains in retail, construction, education, health care and elsewhere.

On Wall Street, stocks sank as investors fretted about the country’s economic health. The Dow Jones industrials dropped 92.52 points to close at 10,460.97.

For now, some economists don’t see the slower job growth of May as a sign that the economy is sliding back into a soft patch. Others aren’t so sure.

The lackluster job growth performance, however, does raise the odds that the Federal Reserve may slow – or soon end – its yearlong campaign to tighten credit, many economists agreed.

Despite the slow growth in payrolls, the civilian unemployment rate actually declined fractionally last month – to 5.1 percent. That was down a notch from April’s 5.2 percent jobless rate and was the lowest overall since September 2001.

“You have both a bit of sweet and a bit of sour in the report,” said Mark Zandi, chief economist at Economy.com.

The employment report often offers seemingly conflicting pictures of what is happening in the labor market because figures are based on two separate statistical surveys. And there clearly was a mismatch between the two surveys in Friday’s report.

The unemployment rate is calculated on the basis of a survey of 60,000 households, sort of a poll of the jobs market. That survey indicated that 376,000 people said they found employment last month, outpacing the number of people who couldn’t find work.

But economists tend to give more credence to a much broader survey of business payrolls that examines 400,000 work sites. And that’s the one that showed only 78,000 jobs added to payrolls.

President Bush wants to see the economy and the job market in good shape, especially as he tries to sell the public and Congress on his vision for revamping Social Security that includes letting workers set up individual investment accounts.

The mixed signals sent by Friday’s report offered something for both Republicans and Democrats.

Treasury Secretary John Snow welcomed the drop in the jobless rate and also pointed out that payrolls have grown by 3.5 million in the past two years. “The economy keeps moving in the right direction,” he said.

But House Minority Leader Nancy Pelosi, D-Calif., argued that “job growth is disappointing and wages are stagnant. … Republicans remain in denial.”

Workers’ average hourly earnings rose to $16.03 in May. While that’s 2.6 percent higher than the same month last year, wage growth is not keeping up with the pace of inflation, economists said.

In an encouraging sign for jobseekers, the average time the unemployed spent searching for work in May was 18.8 weeks, an improvement from the average of 19.6 weeks the previous month.

Wanting to keep inflation in check, the Federal Reserve has boosted short-term interest rates eight times – each in modest, quarter-point moves – since last June. Economists still expect another increase when the Fed meets next at the end of June.

But after that, economists offer various scenarios: The Fed might temporarily pause, or it could stop raising rates later this year or early next year, or it could order fewer rate increases this year than previously expected.

The course of rates will be shaped by a number of economic considerations, including energy prices, analysts said. Oil prices surged to closing high of $57.27 a barrel in early April. They are now hovering above $55 a barrel.

On the payroll front, the 78,000 new jobs posted in May was the smallest since August 2003, when payrolls grew by a tiny 2,000. Economists were forecasting a gain of 175,000.

“Here we go again,” lamented Joel Naroff of Naroff Economic Advisors. “Just when we thought it was safe to say the economy had moved into a more consistent and solid job growth mode, we get this truly weird employment report.”