U.S. nonfarm payrolls declined for the eighth straight month, falling more than expected by a total of 84k jobs in August, according to the Bureau of Labor Statistics. The unemployment rate was pushed up four-tenths to 6.1%, well above expectations that it would remain at 5.7%.

Revisions subtracted another 58k jobs from the previous two months. July's decline was downwardly revised to a loss of 60k jobs from an initially reported loss of 51k jobs, and June's loss was downwardly revised to a 100k drop from an initially reported -51k.

"With this report, there appears to be no end in sight to the distresses in the U.S. labour market, and little to suggest that the much longed-for improvement in labour market conditions is any closer," said Millan Mulraine, economics strategist from TD Securities.

"Moreover, it also suggests that the headwinds facing U.S. consumers are gaining strength. In terms of the Fed, the report will likely give further fodder to the doves on the FOMC, though we believe that it is unlikely to change the current monetary policy stance of the Fed in any meaningful way."

At the end of the trading session, reports emerged from the Wall Street Journal that the U.S. Treasury is close to reaching a deal to help troubled mortgage finance companies Fannie Mae and Freddie Mac. The report said an announcement could be made as early as this weekend. The WSJ cites a source familiar with the plan as saying it includes changes to senior management at both companies.

Also in the U.S., mortgage delinquencies for the second quarter of 2008 moved up six basis points from the previous quarter to 6.41% of all loans outstanding, marking a 29-year high, according to the MBA's National Delinquency Survey released Friday. From one year ago, delinquency rates - which measure mortgages that have at least one payment overdue - have risen 129 basis points.

"The national foreclosure numbers continue to be driven by the hardest hit states continuing to get much worse," said Jay Brinkmann, vice-president for research and economics at MBA.

San Francisco Fed President Janet Yellen said on Friday that although an improvement in market functioning is expected in 2009, conditions could "get worse before they get better." Delivering comments in Los Angeles similar to a speech given a day earlier, Yellen also said she doesn't consider monetary policy to be "excessively stimulatory" since financial conditions are "more restrictive overall" compared to a year ago.

Speaking at a conference in Calgary, Former Fed Chairman Paul Volcker said the current financial crisis is the most "complicated one" he's ever witnessed. Volcker said he expected losses from the crisis to total more than $500B and that the U.S. economy would grow at the slowest pace since the Great Depression.

In Canada, the employment picture was more positive as the Canadian economy added 15,200 net new jobs in August, holding the national unemployment rate at 6.1% for the second month in a row. The gain was slightly stronger than the 10,000 additional jobs forecast by economists and helped undo some of the damage from the previous month when 55,200 Canadian jobs disappeared. All of August's growth was in full-time employment, which increased by 16,100 jobs, while the number of part-time positions declined by 900.

"Today's report provides support to the view that July's employment decline represented an overstatement of the current weakening in the Canadian economy," said Paul Ferley, assistant chief economist from RBC Capital Markets. "It also reinforces the Bank of Canada's contention, contained in its statement issued at the conclusion of Wednesday's policy meeting, that though the domestic economy has slowed it still remains strong."

The Canadian Ivey PMI fell in August to 51.5 from its July mark of 65.5, disappointing economists, whose consensus estimate predicted a reading of 61.8. The employment index, however, jumped to 53.0 from its July reading of 46.3. Inventories slipped to 55.6 from the previous month's 60.8. Supplier deliveries were up at 40.2 over July's 36.4, and prices declined to 72.7 from 80.9 in July.

The global economy is weakening further according to the Organization for Economic Co-Operation and Development (OECD), whose leading economic index declined to a reading of 96.2 in July from 101.4 in August. The OECD also said the G7 leading economic index declined to 96.5 from 101.6 in June. The report comes just two days after the organization revised up forecasts for U.S. GDP to 1.8% from 1.2% and revised down Canada's GDP growth to 0.8% from 1.2%.

In overnight news, one day after the decision to leave rates unchanged at 4.25%, European Central Bankers were out in full force to spread the Governing Council's message of price stability.

ECB President Jean-Claude Trichet said that as long as monetary policy demonstrates a clear and concise path, the impact of the current market rout should not have any lasting effects on the macroeconomy. However, Trichet conceded that these were challenging times and that financial stability did not imply price stability.

Governing Council member Ewald Nowotny gave a press conference in Vienna, Austria on Friday and speculated that consumer price index growth levels may have reached their peak in the euro zone. Speaking later in the day, Nowotny said he sees no reason for the ECB to raise or lower rates.

Meanwhile, ECB Executive Board member Jürgen Stark said inflation in the euro zone was at "worrying" levels not consistent with the ECB's primary objective of price stability.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it and Steve This email address is being protected from spam bots, you need Javascript enabled to view it ,

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