Oil fell more than 2 percent to $69 a barrel on Friday after U.S. employment figures raised doubts about the strength of the economic recovery.

U.S. unemployment in September rose to its highest rate since June 1983, with payrolls dropping 263,000 against market expectations of a 180,000 fall, the U.S. Labor Department said, bringing unemployment to 9.8 percent.

Compared to previous recessions, the pace of the current recovery can only be characterized as glacial, said Mike Fitzpatrick, vice president at MF Global in New York.

U.S. crude futures traded down $1.63 to $69.19 a barrel by 12:06 p.m. EDT.

London Brent crude lost $1.82 to $67.37 a barrel.

Oil inventories have swelled as the recession hits global fuel demand, sending crude prices from record highs close to $150 a barrel in July 2008 to below $33 a barrel in December.

Traders have looked toward wider economic data for signs of a turnaround that would send fuel consumption higher.

At the moment it's looking vulnerable as stocks of oil are still very high and we're still not seeing a huge pick-up in demand, said Sucden Financial trader Rob Montefusco.

Crude found some support as the jobs data pushed down the dollar against major currencies. A weaker greenback tends to boost dollar-priced commodities, as they become more cheaper in other currencies.

Oil markets were also watching talks between six major powers and Iran -- the second largest oil exporter in the Organization of the Petroleum Exporting Countries (OPEC) -- over Tehran's nuclear program.

Both the United States and Iran described Thursday's talks as productive, after Iran agreed to allow U.N. inspectors into a newly disclosed uranium enrichment plant.

While tensions between Iran and the West over the nuclear program have supported prices at times in recent years, but analysts said the current situation could quiet down again.

While we certainly can't rule out more surprises in the next three months, there is a good chance that Iran will fade from the front pages, leaving the diplomatic and intelligence services to quietly do their work in the background, said Societe Generale analyst Michael Wittner.

(Reporting by Matthew Robinson, Gene Ramos and Robert Gibbons in New York; David Sheppard in London; Ramthan Hussain in Singapore; Editing by Marguerita Choy)