Nonfarm payrolls declined by 263,000 in September and the Unemployment rate climbed to a 26 year high 9.8% from 9.7%. Consensus estimates had expected a 175,000 NFP decrease. The largest job losses were in construction ( -64,000), manufacturing, retail trade and government. Since the start of the recession in December 2007, the number of unemployed persions has increased by 7.6 million and the unemployment rate has doubled to 9.8%. Average hourly earnings were up $0.01 last month at $18.67. benchmark revisions to payrolls that will be issued in February showed the economy may have lost an additional 824,000 jobs in the 12 months ended March 2009. The data currently show a 4.8 million drop in employment during that time.

Factory Orders in U.S. Drop 0.8% in August; Ex-Transport Rises 0.4%. Today’s report follows others this week that showed manufacturing contracted or slowed in September. With excess capacity close to a record, companies have less reason to ramp up production until they see stronger gains in demand. While the “cash for clunkers” program boosted automakers’ output in August, it’s now expired, pointing to an uneven rebound.

Treasuries Fall as Yields Near Four-Month Lows Deter Investors and as Focus Shifts to Auctions after early session highs immediately after the employment report showed bigger-than-forecast job losses last month while the unemployment rate rose to the highest level since June 1983. Sselling pressure emerged as investors pushed for concessions to take down $78 billion in note and bond sales next week. The auctions include $39 billion in three-year notes, $20 billion in reopened 10-year notes, $12 billion in reopened 30-year bonds and $7 billion in reopened 10-year Treasury inflation-protected securities. UST's are down across the curve, with 2's -00+/32, 10's -3/32 and the 30yr -12/32. The yield on the 10-year note earlier touched 3.099%, its weakest level since mid-May, while the 30-year bond's yield hit an intraday low of 3.886%, the lowest since late April.

Bernanke Says Jobless Rate May Be Above 9% at End of 2010 Amid Slow Growth. Federal Reserve Chairman Ben S. Bernanke said U.S. economic growth next year probably won’t be strong enough to “substantially” bring down the jobless rate, which may remain above 9 percent at the end of 2010.