It was the first time since World War II that the economy had precisely net zero jobs created for a month.

Economists had been expecting the report to show a net of 75,000 jobs created, an unusually low number considering the US is technically more than two years removed from the end of the last recession .

Stocks sold off sharplyfollowing the report, while bond prices rose and the US dollar fell nearly 2 percent against the Swiss franc.

Markets had been closely watching the August report in hopes that the employment picture would begin to show signs of recovery.

Stocks have slumped more than 10 percent since the beginning of May as concerns grew that the debt and deficit problem was beginning to overwhelm hopes of a recovery following the depths of the financial crisis in 2008 and 2009.

Private payrolls actually rose 17,000, but that was offset by continued shrinkage in government. The number of people unemployed remained unchanged at 14 million.

It was a dismal way to kick off the Labor Day weekend when Americans are supposed to be celebrating work, not bemoaning the lack of it.

"We're in this very flattish-type phase," said Liz Ann Sonders, chief investment strategist at Charles Schwab in San Francisco. "The only relatively good news, and I would emphasize 'relatively,' is we're not in firing mode, not in a job-loss mode. We're in an extraordinarily slow job-gain mode."

The unemployment rate that counts those not looking for work rose to 16.2 percent, tied for the highest in 2011.

The numbers could have been even worse.

The government's birth-death model, which approximates the amount of businesses created and lost during the month, added 87,000 jobs.

The average duration of unemployment edged lower to 40.3 weeks from its previous record high of 40.4 weeks in July. However, the median level spiked from 21.2 to 21.8 weeks.

Among the more disturbing numbers: the amount of people "marginally attached to the labor force" rose to 2.6 million from 2.4 million. These are workers not included in the unemployment count because they had not sought work in the past four weeks but have looked in the past year.

Health care and mining saw more jobs in the month, but telecommunications and government both posted substantial losses. It was unclear how much impact the Verizon strike, where 45,000 walked off their jobs for two weeks, had on the total count. Many of those workers likely received paychecks during the Labor Department's counting period and may not be included in the number released Friday.

Manufacturing lost 3,000 jobs, construction dropped 5,000 and retail lost 8,000.

President Obama is set to deliver a speech to Congress on Thursday that will outline the administration's jobs planas the 2012 election nears.

"There are things that we know work that are waiting for action by the Congress," US Secretary of Labor Hilda Solis told CNBC.

"I do believe that we're going in the right direction, but we need cooperation and it begins with members of the House and the Senate agreeing to do something now," she added.

At the same time, the Federal Reserve has expanded its balance sheet past the $2.5 trillion mark through monetary easing measures geared at boosting spending.