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The report showed that non-farm payroll employment fell by 190,000 jobs in October following a revised decrease of 219,000 jobs in September. Economists had expected a decrease of about 175,000 jobs compared to the loss of 263,000 jobs originally reported for the previous month.
With the continued drop in jobs, the unemployment rate jumped to 10.2 percent in October from an unrevised 9.8 percent in September. The unemployment rate had been expected to show a more modest increase to 9.9 percent.
The bigger than expected increase lifted the unemployment rate to its highest level since a matching rate in April of 1983.
Continued weakness in the goods-producing sector contributed to the continued drop in employment, with the report showing a decrease of 129,000 jobs in the sector. Manufacturing employment fell by 61,000 jobs, while construction employment fell by 62,000 jobs.
The drop in manufacturing employment reported by the Labor Department is in stark contrast to the Institute for Supply Management's reading on employment in the manufacturing sector, which rose to 53.1 from 46.2 in the previous month, indicating growth.
The Labor Department also said that employment in the service-providing sector fell by about 61,000 jobs in October.
Jobs losses in the retail and leisure and hospitality industries more than offset increases in jobs in the professional and businesses services and education and health services industries.
At the same time, the report showed that temporary employment increased by about 34,000 jobs, with analysts noting that temporary employment is a leading indicator.
Commenting on the data, Rob Carnell, chief international economist at ING, said, "With markets feeling a degree of indecisiveness at current junctures, today's figures will have injected a further dollop of doubt about the sustainability of the recovery and of recent market gains."
The report also showed that average hourly earnings rose by $0.05 or 0.3 percent to $18.72 in October after edging up $0.01 or 0.1 percent to $18.67 in September. Over the past 12 months, average hourly earnings have risen by 2.4 percent.
On Thursday, the House voted by an overwhelming margin to extend unemployment insurance benefits for an additional 14 weeks.
The measure, which extends unemployment coverage for 14 weeks across the country and adds an additional six weeks for the areas with the highest unemployment, passed by a vote of 403 to 12, with 18 members not voting.
The $24 billion bill, which passed the Senate 98 to 0 on Wednesday after overcoming weeks of GOP procedural delays, now goes to President Barack Obama, who is expected to sign it.
The bill also extends the $8,000 first-time homebuyer tax credit and expands it to include a $6,500 credit for people who have lived in their current homes for at least five years.
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