Friday's surprisingly weak employment report offered more evidence that economic growth is slowing again, which will likely give central bankers second thoughts about pulling back stimulus efforts in the coming months.
March payrolls rose by 88,000 in March, less than half the recent trend, the Labor Department said. A separate household survey found 500,000 people left the job market.
Payroll gains for January and February were revised up by a total of 61,000. But the labor participation rate fell to 63.3%, the lowest since 1979, suggesting earlier job creation was overstated.
"People probably see the number of new job ads, and openings aren't there," said Keith Hall, senior research fellow at George Mason University's Mercatus Center and a former Bureau of Labor Statistics commissioner.
With people exiting the labor force, the jobless rate dipped to 7.6% in March, the lowest since December 2008. But if the participation rate were held constant, unemployment would have edged up to 11.1%.
Not So Fast Stocks sold off but closed near Friday highs, perhaps as investors see the Federal Reserve's quantitative easing continuing at its current pace for longer.
Several Fed officials have hinted that the $85 billion in monthly bond buys could be scaled back this year if job growth, which had been averaging 200,000 a month, stays on track.
The dovish San Francisco Fed president even said QE curbs could begin this summer. That seems overly optimistic now.
"It's more likely than not this is going to delay tapering off QE," said Tim Duy, a University of Oregon economics professor.
Across-the-board federal budget cuts that went into effect March 1 probably had little impact on the latest payroll data, and the next few months should continue to disappoint, he said.
The three-month average of payroll gains is 168,000. Duy estimates the underlying trend is closer to 150,000. "The momentum is not there.
Seasonal adjustment problems may have skewed earlier payroll gains higher. Fewer layoffs also may be masking tepid hiring, making the net gain look bigger.
Payroll taxes, which went up Jan. 1, may be hurting hiring now too, Hall said. The loss of 24,100 retail jobs last month could be a sign of that. Apparel manufacturers also cut staff. Hiring at bars and restaurants slowed as well.
Uncertainty over fiscal and regulatory policies is still making businesses reluctant to hire, Hall said, adding to discouragement among job seekers and their exit from the workforce.
"This is another sign that there just isn't much confidence that we're in a full recovery," he said.
The Institute for Supply Management's March factory and service-sector indexes earlier in the week signaled slowing growth.
The share of industries expanding staff last month fell to 54.3%, the lowest since July 2010 and down from 59.6% in February and 68.8% a year earlier.
Construction firms hired 19,000 more employees, down from 49,000 in the prior month, despite the recovering housing market. Staffing at home improvement chains fell by 10,100.
Manufacturers shed 3,000, financial services trimmed 2,800, and governments cut 7,000, due mainly to U.S. Postal Service layoffs. The lower-wage health care and leisure sectors continued to add employees, but at a significantly slower pace.
Wages for production and nonsupervisory workers dipped a penny to $20.03, sending the annual gain back below 2%. The average workweek for rank-and-file workers was flat vs. February.