Mixed Signals

The nation's unemployment rate climbed last month to 9.7 percent — the highest in nearly a generation — but the number of job losses was less than expected and the smallest monthly total in a year.

"It's good to see the rate of job losses slow down," said Nigel Gault, chief U.S. economist at IHS Global Insight. But with unemployment rising, "there isn't the underlying fuel there for strong consumer spending growth," which is vital for a strong recovery.

"The bulls let out a collective sigh of relief today, after the government's highly anticipated payrolls report wasn't as sour as expected," said Andrea Kramer at Schaeffer's Investment Research. "Against this backdrop, the bulls won the battle for the session, but the bears won the war for the first week in three."

"While the labor market is still showing significant job losses, the August employment report showed a continued slowing in their pace, and we expect job growth to turn positive by year-end as the recovery becomes entrenched and businesses feel more comfortable hiring," said Barclays economist Dean Maki.