U.S. employment rose far less than expected in January, partly the result of severe snow storms that slammed large parts of the nation, but the unemployment rate fell to its lowest level since April 2009.

KEY POINTS: * Nonfarm payrolls grew just 36,000, the Labor Department said on Friday, far less than the 145,000 increase that economists had expected. * The government noted that severe weather could have affected construction payrolls, which dropped 32,000 last month. There were also large declines in the employment of couriers and messengers. * The modest jobs gains are at odds with other data for January, which had suggested employment growth was picking up and had raised hopes that the manufacturing-driven recovery was now spreading to other sectors of the economy.

COMMENTS:

TOM BENTZ, BROKER, BNP PARIBAS COMMODITY FUTURES INC, NEW

YORK:

At face value the payroll data looks negative, but with revisions and weather maybe not as bad. But after the data the euro got hit, and the dollar stronger, which pulled crude down initially.

Meanwhile markets are still concerned about Egypt unrest continuing. Traders may still be concerned about being short ahead of the weekend.

RICHARD ILCZYSZYN, SENIOR MARKET STRATEGIST, LIND-WALDOCK,

CHICAGO:

Regardless of the jobs data or the (oil) inventories it's going to be hard for anyone to short this (oil) market with all this geopolitical tension still out there.

JOHN SPINELLO, TREASURY BOND STRATEGIST, JEFFERIES & CO., NEW

YORK:

People are looking at the data and trying to interpret it as being bullish for the economy, but I'm a little confused myself.

The unemployment rate down to 9 percent, but that's just a function of how many people are out of the workforce now.

The (Treasury) market is just a little bit irrational -- the market is very emotional, and people don't want to hold on to positions -- they want to sell. The Street wants to be short ahead of supply next week.

FRED DICKSON, CHIEF MARKET STRATEGIST, THE DAVIDSON COS., LAKE

OSWEGO, OREGON:

The top line number was disappointing. It was pretty much what we were looking for, although I guess I was the consensus person at the bottom of the pack. Clearly, it's a disappointing non-farm number. What's interesting is that stands in contrast to the dip in the unemployment rate that's based on the household survey that includes small businesses, self-employment. So there's going to be some confusion coming from the report.

The market didn't react much following the announcement. We're still struggling to create jobs at significant-sized employers and, not surprisingly, we're still continuing to see jobs cut in the government level. Overall, I'd say the economy is continuing to move ahead at a slow, but steady pace in spite of the lack of meaningful job growth, and that's been a trend we've seen happening over the last several months.

ROBERT LUTTS, PRESIDENT AND CHIEF INVESTMENT OFFICER AT CABOT

MONEY MANAGEMENT, SALEM, MASSACHUSETTS:

All economic data is two steps forward, one step back. We got great manufacturing data, great retail data this week. Lines don't go straight up.... It's troublesome and a little worrisome but I think markets will see this as part of a movement in the right direction and toward recovery.

We're certainly going in the right direction; however, nowhere near as fast as everyone wants us to.

CARY LEAHEY, MANAGING DIRECTOR AND SENIOR ECONOMIST, DECISION

ECONOMICS, NEW YORK:

On the drop in the unemployment rate: the seeming good news is bad news. The drop occurred because fewer people looked for jobs. People are leaving the labor force because they're discouraged. And also bad weather might have played a role.

The impact of winter weather was pretty important on the payroll side. Typically in January you have about 300,000 workers who report that they can't get to work due to weather. This time you had 700,000. So you had a distortion in the payrolls of 400,000 so the market could estimate that the real 'whisper' payroll increase number was probably more like 150,000 to 200,000 rather than the 36,000 that was reported.

I think the market will treat this as a status quo number when all is said and done. The workweek only dropped 0.1 percent. Manufacturing was quite strong, both in the change in workers and weekly hours.

SEAN INCREMONA, ECONOMIST, 4CAST LTD, NEW YORK:

Weather did have an impact, construction was weak, below trend, and transportation and warehousing was also pretty soft and that could be effected by weather. Aside from that I think these figures over the last couple of months probably understate to a degree the recovery in employment. The recovery is mild, but these numbers are a lot more mild than they should be.

The unemployment rate headline at 9 looks good but the underlying dynamics there are not that great with the labor force just continuing to contract. It really is a disappointing number but hopefully once we get out of this winter we will be able to pick up some more traction.

DAN COOK, SENIOR MARKET ANALYST, IG MARKETS, CHICAGO

I don't even know what to think, to be honest. Last month we saw a drop in the unemployment rate that was sizable, now it's drop down to 9 percent, yet we only added 36,000 jobs.

My first question is where are all the workers going - are they all just giving up? Right now, as a market participant myself I am having trouble what to make of this data. One thing that wouldn't surprise me is we've seen quite a bit of a run-up this week, it wouldn't surprise me after this number if we started to see some profit taking. I don't see any positive outcome on these numbers, this won't be what fuels an additional rally, that's for sure.

Bernanke in a way kind of confirmed (the Fed policy) yesterday, basically committing to stay supportive of it. As we get a little later in the year as that program starts to unwind, maybe we start to see a bit of a correction.

Right now it's hard to say - we get a pullback like we did last Friday, but there is no follow through and all of a sudden they pop back up. I still think the bias is upward.

ERIC TEAL, CHIEF INVESTMENT OFFICER, FIRST CITIZENS BANCSHARES

INC., RALEIGH, NORTH CAROLINA:

The number is disappointing, but when we get disappointing numbers it permits investors to see an ongoing continuation of accommodative monetary policy. That is why the market is probably not showing much reaction to the poor news. There is a silver lining to some of the negative economic numbers.

We think that (a third round of quantitative easing) is highly unlikely at this point, given the changes we saw in the midterm elections. But it does beg the question of whether the economy is sustainable after QE2 expires. I think it could be several years before we start seeing real job improvement and the unemployment rate below 8 percent. The problem is structural in nature, especially around the real estate and construction sectors.

JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE

RIVER, NEW JERSEY:

An extremely weak unemployment report should not be deceived by the drop in the unemployment rate to 9 percent. This is a very poor report. This will not have much affect on the dollar because the dollar is focused on events in the Middle East and Europe. Everything is event risk. The dollar is probably going to strengthen next week on the continuing turmoil in Egypt and the unwillingness of the European Central Bank to target inflation.

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON

REUTERS, WASHINGTON, D.C.:

Given the mixed breakdown and snowstorm that hit in the survey week, we should probably not make strong conclusions on the unexpected weakness of the payroll regarding the underlying pace of activity.

January data may be on the low side of trend, but manufacturing looks set to be an important exception on the upside. A weather influence is hinted at by construction being particularly weak with a 32k fall in jobs, the steepest of 5 straight declines, and also by the sector leading the fall in the workweek in falling to 37.3 from 38.1 hours, while manufacturing rose to 40.5 from 40.4 and private services were steady at 33.2. It should however be noted that housing is a weak sector even beyond the weather effects. ... Given the mixed breakdown in this report, and positive signals in other data, it appears likely that without the bad weather, the January payroll would have been significantly stronger than this +36k outcome.

MARKET REACTION: STOCKS: U.S. stock index futures fell BONDS: U.S. bond prices extend losses FOREX: The dollar fell, then recovered

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