Job growth was less than expected in August as the U.S. economy added 169,000 positions, raising questions over whether the Federal Reserve will begin a pullback on its historically easy monetary policy.
The Bureau of Labor Statistics also said the unemployment rate dropped to 7.3 percent, its lowest since December 2008, but due primarily to fewer Americans in the labor force.
A more encompassing rate that counts the underemployed and those who have quit working also fell, dropping to 13.7 percent.
"Obviously very disappointing—it's hard to see very much positive coming from this report," said Mark Hamrick, Washington bureau chief for Bankrate.com.
Traders initially liked the report; the stock market retreated on geopolitical turmoil, before rebounding again. Interest rates dropped, and the U.S. dollar lost ground against most of the world's currencies.
The market movement likely underscored the notion that investors have more to worry about than the economy, as Syria roils and Washington braces for a contentious debt showdown.
"Overall the report contains both positive and negative factors, and while insufficient to change our expectations over an imminent reduction in the pace of bond purchases it should do wonders for settling some of the indigestion suffered by worrywarts in the bond market," said Andrew Wilkinson, chief economic strategist at Miller Tabak. "The word 'Goldilocks' springs to mind somewhere, but we're not quite sure where to place it."
Indeed, some surmised that the number was good enough to show economic expansion but just tepid enough to keep any Fed stimulus removal tepid.
The Fed is buying $85 billion a month in Treasurys and mortgage-backed securities and is expected to begin unwinding its $3.6 trillion balance sheet later this month.
"We have no reason to expect something different from the (Fed) announcement on the 18th," said Liz Ann Sonders, chief investment strategist at Charles Schwab. "It probably won't be a big move. I think they'll take a baby step."
Of the more notable numbers from the BLS, previous months of solid job creation were revised substantially lower.
(Read more: CNBC.com live blogs the jobs number)
July's number got knocked down to 172,000 from 188,000, and June's tumbled all the way from 162,000 to 104,000.
Part-time jobs surged, rising 211,000 to 19.3 million, a gain of 1.1 percent from July.
Investors were watching the jobs number closely for clues on what the Federal Reserve's next step will be.
Central bank officials have said the monthly asset purchase program likely would be pared back—"tapering" in market lingo—so long as the economic data held up. The conversation changed Friday to a "taper-light" that will come because of the mediocre job growth.
"When (Fed Chairman) Ben Bernanke first raised the specter of tapering several months ago, the case was better for tapering than it is right now," Hamrick said. "With the three-month average for payrolls growth below 150,000, Bernanke is going to have to make a very forceful case that strength in the economy is acceptable to begin withdrawing stimulus."
Many of the report's internals were poor.
The labor force participation rate slumped to 63.2 percent, its worst reading in 35 years.
More than half the jobs added came through estimates the government does each month of the amount of positions gained or lost through new business openings and closures. The so-called birth-death model added 90,000 to the total.
(Read more: 12 jobs where women win on pay)
"Demand isn't there and money to pay additional workers isn't there," said Kathy Bostjancic, director of macroeconomic analysis at The Conference Board. "The lackluster labor market might lead the Federal Reserve to delay the tapering of its quantitative easing. "
Unemployment for blacks jumped to 13.0 percent from 12.6 percent, while the average duration of unemployment hit a five-month high at 37 weeks.
And job quality was at the low end of the income spectrum, as retail led the way with 44,000. Health care was next with 33,000, professional and business services gained 23,000 and bars and restaurants added 21,000.
The motion picture and sound recording industry lost 22,000 positions.
(Read more: Services sector growth jumps)
On the plus side, the average work week increased 0.1 percent to 34.5 hours and the average wage rose 5 cents to $24.05.
Recent data has shown an improving economic picture.
Weekly jobless claims have held steady below the 350,000 level, which is seen as important to indicate expansion. Institute of Supply Management employment numbers have backed up that story.
However, Friday's report shows that the labor market is far from healed.
"We've got a generational shift going on here. It's going to be persistent," said Sue Marks, founder and CEO at Pinstripe, a global employment recruiting firm. "It's a systemic problem and a systemic situation that's going to require some new thinking."
_ By CNBC's Jeff Cox. Follow him
@JeffCoxCNBCcom on Twitter.