The sputtering U.S. economy created just 126,000 jobs in March as bad weather, weak consumer spending and flailing corporate profits resulted in the worst report since December 2013.
Economists expected nonfarm payrolls to rise 245,000 in March, with the unemployment rate holding steady at 5.5 percent, according to Reuters. February's numbers were revised lower to 264,000 from the initially reported 295,000, while January's number fell from 239,000 to 201,000.
The total fell well short of the 269,000 average over the past year and was the first time in 14 months that the number dropped below 200,000.
However, the overall unemployment rate held steady at 5.5 percent, as a generational low in labor force participation helps keep the figure low. A separate gauge that includes those who have stopped looking for work as well those employed part-time for economic reasons—the underemployed—edged lower from 11 percent to 10.9 percent.
The jobs numbers come as both the economy and corporate profits have been weakening substantially.
In its most recently estimate, the Federal Reserve's Atlanta branch is projecting the U.S. economy to show just a 0.1 percent growth rate in the first quarter. At the same time, corporate profits are expected to drop about 3 percent for the period and another 2 percent or so in the second quarter, according to S&P Capital IQ.
"We were due a clunker," said John Canally, chief economic strategist at LPL Financial. "It's probably the same things that are going to be impacting the earnings season in a couple weeks. It's the strong dollar hitting manufacturing, the port strike hitting manufacturing, it's the really awful weather...But across all sectors, it was just pretty soft."
Markets reacted negatively to the report, sending stock market futures lower and government bond yields and the U.S. dollar tumbling. Stock and bond markets are closed in the U.S. to mark Good Friday.
The conflicting economimc signals have put the Fed in a quandary: Central bank officials have been indicating a desire to raise short-term interest rates this year as the jobs market improves, but must contend with other parts of the economy that aren't as strong.
Talk on Wall Street quickly shifted from expectations for a rate hike in June to later in the year.
"Pretty much across the board a soft report," said Kathy Jones, fixed income strategist at Charles Schwab. "It has clearly pushed back expectations from a June rate hike on the part of the Fed. Now we're probably looking at a higher likelihood in September, if then, and a flatter yield curve."
Despite the weak headline numbers, there were some signs of wage pressures. Average hourly earnings rose 7 cents an hour to $24.86, representing a 2.1 percent gain that gets closer to the Fed's target. The average work week, though, declined one-tenth to 34.5 hours.
Full-time positions rose 190,000, while those working part-time declined 170,000. The total employment level increased just 34,000. The average duration of unemployment declined to its lowest level since February 2010 at 30.7 weeks.
The service sector, as has been typical during the jobs recovery, led the way with 40,000 new positions. Retail added 26,000 and health care grew by 22,000.
Weaknesses came in mining, which lost 11,000 jobs, and nursing care, which shed 6,000 positions. The normally reliable bar and restaurant industry, which added 66,000 in February and had been averaging 33,000 a month, contributed just 9,000 in March. Manufacturing lost 1,000 jobs.