The nation's labor market took a turn for the worse in September as employers eliminated a net 263,000 jobs, far more than expected and reversing a pattern of steadily declining payroll losses in recent months, the Labor Department said today.

September's unemployment rate ticked up to a 26-year high of 9.8% from 9.7% in August and 6.2% in September 2008. The jobless figure is expected to pierce 10% before the end of the year, an ominous sign for the holiday shopping season.Although the unemployment rate was expected to edge higher last month, the size of the job cuts came as a surprise and casts a shadow on an economy that has been showing signs of recovering. Many analysts had generally expected a drop of about 170,000 to 190,000 jobs last month, after a loss of 201,000 jobs in August.Last month's job reductions were felt in almost every major sector, except for healthcare, which added 19,000 jobs as it has continued to grow during the recession.Construction payrolls fell by 64,000 over the month, and manufacturing lost 51,000 jobs. Factory employment has now fallen by 2.1 million since the recession began in December 2007.Government employment also shrank last month, by 51,000 jobs, and the retail industry staffing was down 39,000.In the third quarter, job losses averaged 256,000 a month. That is down from average monthly declines of 428,000 in the second quarter and 691,000 in the first three months of the year.Still, the September labor statistics indicated that employers are still paring down their workforces, even after eliminating more than 7 million jobs since the start of the recession.What's more, the average weekly hours of work dropped to a record low of 33 last month, indicating that employers are continuing to impose furloughs and reduced work hours.Small businesses, in particular, are continuing to trim payrolls as they struggle to lower costs, said William Dunkelberg, chief economist at the National Federation of Independent Business, a lobby group for small firms. Over the next three months, twice as many small employers are planning to reduce jobs than add to their staffing, according to the federation's survey in September."Retail sales are rising but not enough to trigger the hiring of additional employees," he said. "The job-generating machine is still in reverse."