Job creation tumbled in May, with the economy adding just 38,000 positions, casting doubt on hopes for a stronger economic recovery as well as a Fed rate hike this summer.
The Labor Department also reported Friday that the headline unemployment fell to 4.7 percent. That rate does not include those who did not actively look for employment during the month or the underemployed who were working part time for economic reasons. A more encompassing rate that includes those groups held steady at 9.7 percent.
Wall Street was looking for payroll growth of 162,000 and the unemployment rate holding steady at 5.0 percent.
"There's one word for it, which is just shocking," said Dan North, chief economist at Euler Hermes North America. "Unfortunately it does look like a trend. It's not great news."
The disappointing report immediately clouded the possibility of a Fed rate hike in June or July.
The probability for a June move plunged to 6 percent from 21 percent before the 8:30 a.m. ET release, while July fell to 42 percent from 58 percent. September now is the next most likely date for a rate increase, with a better-than-a-coin-flip chance of 52 percent.
"It makes it a lot tougher for the Fed, clearly. It now puts them in an awkward position of having to justify higher rates into a slowing job market," said David Lafferty, chief market strategist at Natixis Global Asset Management. "I don't think history would look very favorably on that."