The Labor Department reported that the U.S. economy added 235,000 jobs in August, a big miss against expectations for an increase of about 720,000.

There were also revisions made to the prior two months. The June reading was revised up by 24,000 to +962,000 jobs from +938,000. July's reading was revised up by 110,000 to +1,053,000 jobs from +943,000. In total, the two revisions represent an increase of 134,000 jobs from what was previously reported. That will help offset the August miss, but it still puts into question the recovery in the labor market.

The official release can be found here.

The unemployment rate declined 0.2 percentage points to 5.2%, in line with estimates. The labor force participation rate, which accounts for the number of Americans looking for work or currently working, was unchanged at 61.7%. About 200,000 individuals reentered the labor force in the month.

A different, broader measure of unemployment and underemployment, known as the U-6, which accounts for those working part-time because they are unable to find full-time work, fell to a seasonally adjusted 8.8%, from 9.2% in July.

In July, the average hourly earnings for all employees on private nonfarm payrolls increased by $0.17 to $30.73 per hour, representing an increase of about 4.2% YoY, which is an acceleration from the prior month. The release said, "The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings." This analysis is consistent with prior reports.

By sector, employment in professional and business service increased by 74,000 and transportation and warehouse jobs grew by 53,000. Elsewhere, mining added 37,000 jobs, other services also added 37,000 jobs (mostly in personal & laundry services and repair & maintenance), information was up 17,000, financial activities rose 16,000, and mining increased by 6,000.

Education was mixed with private education jobs growing by 40,000, though state government jobs education fell by 21,000 and local government education employment was little changed. The release noted that changes in employment patterns within education are difficult to interpret because the pandemic has disrupted seasonal hiring and layoff patterns.

Offsetting the gains in August was retail trade, where employment declined by 29,000 with food and beverage stores down 23,000 and building material and garden supply stores falling 12,000. Additionally, the economy didn't get any help from the leisure and hospitality sector, where employment was unchanged after increasing by an average of 350,000 per month over the past six months. The flat month must be related to Delta variant pressures and the challenges hospitality companies are having getting people to come back to work.

Overall, this weaker-than-expected report suggests the recovery in the labor market has lost some steam, an outcome that is likely due to the Delta variant. But a disappointing jobs number also puts into question the timeline of when the Fed will announce the start of tapering. The report suggests an announcement won't be made at least for another month or two because the recovery in the labor market still has ways to go. See, achieving full employment is one side of the Fed's dual mandate, meaning that the slowdown in jobs growth and the general uncertainty with the Delta variant may keep the Fed accommodative for longer.

So why are stocks generally lower Friday despite the potential for an accommodative Fed and a delay to tapering? The action may be driven by some near-term concerns around stagflation as the report showed upward pressure on wage gains and slowing jobs growth. Concerns around stagflation explains why we are seeing tech stocks outperform Friday by a wide margin. Investors typically like to buy up secularly growing tech on worries about slowing economic growth.