NEW YORK (Reuters) - U.S. job growth slowed more than expected in September as the recovery from the COVID-19 slump shifts into lower gear amid diminishing government money and a relentless pandemic, leaving many at the risk of being permanently unemployed. In the last monthly employment report before the Nov. 3 presidential election, the Labor Department on Friday said nonfarm payrolls increased by 661,000 jobs last month after advancing 1.489 million in August. Economists polled by Reuters had forecast 850,000 jobs were created in September. STORY: LABOR DEPT RELEASE: U.S. stock futures were already lower on news that U.S. President Donald Trump and First Lady Melania Trump had tested positive for COVID-19 and extended losses slightly after the employment report. MARKET REACTION: STOCKS: U.S. stock index futures extended losses, with S&P 500 e-minis last off 1.55%, pointing to a lower open BONDS: Yields on benchmark 10-year notes backed off slightly to 0.6545%; Two-year Treasury yields were even yielding 0.1230% FOREX: The dollar index slightly extended gains up 0.18% COMMENTS: STEVEN RICCHIUTO, U.S. CHIEF ECONOMIST, MIZUHO SECURITIES USA, NEW YORK “From a market perspective, the private sector is actually more important than the public sector. The public sector is a seasonal factor. The net result is the seasonal factors pulled down the state and local portion, very, very dramatically, in particular in the in education area. The private sector component however continues to improve at a healthy pace. “The key thing here is that the temporary layoffs, the people who were forced out principally by COVID, continues to drop and drop rapidly. To me the overall numbers are still very, very healthy and are still very consistent with a nice rebound in economic activity. “Today perhaps because of the Trump news we won’t see a reaction. But what these numbers are telling you is that going forward we’re on the right path, perhaps better than what the bearish sentiment would tell you.” QUINCY KROSBY, CHIEF MARKET STRATEGIST, PRUDENTIAL FINANCIAL, NEWARK, NEW JERSEY: “Despite the drop in the unemployment rate, the jobs report was disappointing. But what it does is it underscores that the labor market, in concert with the economic backdrop, has transitioned from the stellar performance coming out of the lockdowns to a slower, but solid, trajectory.” PATRICK LEARY, CHIEF MARKET STRATEGIST, INCAPITAL, MINNEAPOLIS “This morning we woke up with a risk off tone to the market with the news of President Trump testing positive for COVID-19, which just adds further uncertainty to all the uncertainty that already exists regarding the election. “The data really is a mixed bag, I would call it. But my initial reaction was, ‘ouch!’ I don’t think it’s going to do anything for the market. It’s not positive enough. “The headline unemployment rate dipped below seven below 8%, so that was a nice improvement. There are two different types of data. The survey data is showing a better situation. However, we also did see the labor force participation rate drop. So that doesn’t really doesn’t bode well for the economy. “Some kind of agreement on stimulus, that’s really the only thing that can move the market higher, talking about equities, and in terms of rates moving higher before the election. That’s really the only thing they can do to add any positivity here.” SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS, MO (by email) “Payrolls grew at a slightly-less-than-expected pace, but there were positive revisions to the prior two months’ readings, and the unemployment and underemployment rates also both fell. “Internal readings improved for the most part with the average workweek continuing to lengthen, wage growth holding steady, and the participation rate ticking down slightly. “These data are consistent with a labor market that is rebounding, albeit at a slower pace than a few months ago, which should be enough to support consumers and consumption. “While risks remain, such as election and COVID-19-related uncertainty, we believe investors should continue to remain fully invested and we favor U.S. large- and mid-cap companies, and the Information Technology, Consumer Discretionary, Communication Services, and Healthcare sectors.” OLIVER PURSCHE, PRESIDENT, BRONSON MEADOWS CAPITAL MANAGEMENT, FAIRFIELD, CONNECTICUT “The employment report’s not great. I don’t know if seasonal factors or hurricanes affected the numbers. Overall, the job market has been improving perhaps all the storms have impacted the shortfall.” “The unemployment rate was better than expected. We haven’t seen futures move much since the report came out.”