U.S. nonfarm payrolls fell for the third consecutive month, with the U.S. Labor Department reporting that the U.S. lost 80k jobs in March. The unemployment rate rose to 5.1% in March, higher than the expected 5.0% and above the previous rate of 4.8%.

February's jobs figure was revised to a loss of 76k jobs from an initially-reported loss of 63k jobs. Total nonfarm payroll employment has fallen by 232k over the past three months. In March, job losses occurred in construction, manufacturing and employment services, the report said.

Expectations had been all over the map for the U.S. nonfarm payrolls report. The consensus was looking for a loss of 50k jobs, but of the 79 economists surveyed, forecasts ranged from an increase of up to 65k new jobs in March to a decline of 150k. Forecasts for the unemployment rate ranged from 4.7% to 5.1%.

The number of unemployed persons increased by 434,000 to 7.8 million in March. Since March 2007, the number of unemployed persons has increased by 1.1 million and the unemployment rate has risen by 0.7%, the report noted.

In March, employment continued to fall in construction, manufacturing and employment services, while health care, food services and mining added jobs, according to the Department of Labor report.

The net change in manufacturing payrolls was -48k, worse than the consensus forecast of -35k. February's figure was revised to -46k from an initially-reported reading of -52k.

Employment data have been fairly mixed in March, as the ADP report showed a modest improvement in private employment but jobless claims continued rising. As well, the latest ISM surveys reported continued contraction in the employment components of both the manufacturing and non-manufacturing surveys.

Prior to the release, Steven Ricchiuto, an analyst at Handelsbanken Capital Markets, said markets were waiting to see if the U.S. is in recession, and that this latest payrolls data will be a major factor in clarifying whether the economy will skirt a major downturn or not.

But Tim Rogers, from Briefing.com, said prior to the release he didn't think the report would foretell a bottom in the market given "the continued pressure from housing, credit, oil prices and the laundry list of other economic headwinds."

Average hourly earnings rose 0.3% from February, and is up 3.6% on an annual basis. Both figures were in line with expectations.

The average weekly hours worked rose to 33.8 from February's unrevised reading of 33.7.

Dow futures popped about 20 points just prior to the release, but dropped to an intraday low of -50 before bouncing back to around +20 points to 12665 on the day. Yield on the two-year Treasury note immediately lost 10 bps to 1.81% before bouncing back to the 1.887% level, while the 10-year note lost 5 bps to 3.526% before rebounding to 3.566%.

The probability of a 50 basis point cut at the Fed's next meeting popped to 34% according to Fed fund futures. Against the euro, the USD initially lost six tenths of a cent to 1.577 before bouncing back to the 1.57 level, and against the loonie, the greenback lost three tenths of a cent to 1.0030.

By Stephen Huebl with contributions from Erik Kevin Franco