John Briggs, head of cross asset strategy at RBS, said one report will not stop the Fed. "I lean towards them sticking to plan," said Briggs.
"The data series can be volatile. You had 200,000 for October and 241,000 for November with revisions. That puts the three-month average at 170,000 which is disappointing, but I don't think it's enough to change the tapering plan and with the unemployment rate, it makes it difficult to see a major rally in Treasurys," said Briggs.
The Fed has targeted 6.5 percent as a level to consider raising short-term rates, but Fed watchers believe that is not a hard-line target and the Fed will be flexible.
"I think yields could probably go lower because people were short but I'm not sure you get past 2.75 and 2.80 (10-year yield) because of the constraints on the Fed because of where the unemployment rate is," Briggs said.
JPMorgan chief U.S. economist Michael Feroli said the disappointing jobs report makes Fed Chairman Ben Bernanke's final meeting as chairman particularly difficult on Jan. 28 and 29. Fed Vice Chair Janet Yellen takes over as chairman after that meeting.
Feroli, in a note, said the Fed could find enough special factors to justify that the number is distorted and it should proceed with a $10 billion taper at its January meeting.
"The forward guidance decision could be even more difficult than the tapering call. Rather than lower the unemployment threshold further—which would be doubling down on predicating policy on an arguably flawed statistic—we think the Committee will continue along the path of downplaying the significance of the unemployment rate in the setting of interest rate policy," he wrote.
Ironically, the bombshell employment report comes in the same week that many in the markets were talking about whether the Fed would move early to raise rates because of stronger growth.
(Read more: Job growth weak, raising questions about Fed move)
Stocks slumped at midday, after initially rising Friday, and bond yields moved lower. The 10-year was yielding 2.88 percent, below the 2.97 percent yield earlier in the day.
Another negative in the report was a decline in the participation rate, which fell to 62.8 percent, the same as the October rate and the lowest since 1978. It had been at 63 percent in November. From 2003 to 2007, it was closer to 66 percent. The rate reflects the number of Americans working or actively looking for jobs.
There had been high hopes for the December jobs report and expectations that it might confirm new momentum that has been showing up in consumer spending, trade data and industrial production.
But instead it raises real questions about whether the pickup in GDP growth—to 4.1 percent in Q3 and as much as 3 percent in Q4—will now sputter like so many other rebounds have since the recovery began. Barclays economists said Q4 GDP was tracking a tenth higher at 3.4 percent, after further strength in wholesale inventories Friday.
"I don't believe it. I would just ignore it. I think it will be revised away," said Moody's Analytics chief economist Mark Zandi of the jobs report. He said the report reflects what should be a very weak underlying economy, which none of the other data indicate. "This is just one of those out-of-bounds numbers."
As for the Fed, officials will wait for more data before altering their plans, and he expects them to proceed with tapering. "I don't think they'll feel the trend has shifted," he said.