The national unemployment rate has jumped to 9.8%. The rising numbers are putting pressure on Congress to give additional unemployment benefits, as well as extend some programs that were scheduled to expire by the end of the year, reports Jack Healey for The New York Times.

The news about jobs sent oil prices lower, to $69.68 a barrel. The jobless numbers are fueling doubts about the economic recovery and its strength. United States Oil (NYSEArca: USO) was trading more than 1% lower this morning.

Factory orders declined unexpectedly in August by the largest amount in five months, reports Martin Crutsinger for the Associated Press. Demand dropped by 0.8%, worse than the 0.7% gain economists had expected. The drop was in part because of declining commercial aircraft demand.

Bank of America has given the go-ahead for a dividend payment of $713 million on preferred stock issued to the Treasury Department. The deal was part of the government’s bank rescue program last year, reports the Associated Press. PowerShares Financial Preferred (NYSEArca: PGF) is down more than 1.25% this morning.

For more stories on energy, visit our energy category.

This week, State Street launched its latest ETF, SPDR Wells Fargo Preferred Stock ETF (NYSEArca: PSK), that invests in nonconvertible preferred stocks, according to IndexUniverse. The fund has an annual expense ratio of 0.45% and its underlying index provides exposure to 160 or more securities.

PSK will try to reflect the performance of the Wells Fargo Hybrid and Preferred Securities Aggregate Index. The new ETF includes non-convertible preferred securities that are priced at a par amount of $25, rated investment-grade and have a minimum monthly trading volume of at least 250,000 trading units in each of the last six months.

Preferred securities usually pay a fixed rate of distribution along with potential gains investors could receive from price movements. Preferred shareholders also get the benefit of preferential treatment over holders of common stock in the likelihood of bankruptcy or other legal disputes over distributions.

The new SSgA ETF will be competing against two other preferred share ETFs already on the market:

• iShares S&P U.S. Preferred Stock Index (NYSEArca: PFF): up 33% year-to-date

• PowerShares Preferred (NYSEArca: PGX): up 14.2% year-to-date

PowerShares also has a PowerShares Preferred Financial (NYSEArca: PGF) fund available, as well.

For more information on preferred share ETFs, visit our preferred stock category.

Max Chen contributed to this article.

Don Dion for TheStreet says that the preferred ETFs offer access and diversification along with increased liquidity for the preferred shares. Owners of preferred stock have a higher claim on assets and earnings than owners of common stock.

There are several reasons that these shares and ETFs have attracted more attention lately:

• Financial shares have shown marked weakness because of the housing and credit meltdown. Their yields have declined quickly.
• The payouts provided by preferred securities have the payout advantage of bonds and the tax advantage of common dividends.
• Some investors treat their preferred shares as havens. The Jobs and Growth act of 2003 reduced the tax on dividends, making payouts from these funds relatively tax efficient.

A sample of preferred ETFs:

• PowerShares Preferred (PGX): up 3.4% year-to-date

• iShares S&P U.S. Preferred Stock Index (PFF): up 14.9% year-to-date

Preferred stock was purchased by the government to the tune of $100 billion when the Troubled Asset Relief Plan was unveiled late last year. Preferred shares are a higher class of stock, and holders of preferred shares don’t have voting rights, but they get paid dividends before common shareholders.

Now the government has been talking about making the conversion to common stock, which could be beneficial to taxpayers if it takes place. Why? If these banks have a little extra common stock cushion, it could make them less likely to take bad bets that cost tax-paying citizens dearly. But it still will mean more risk, because there’s no way of knowing what those shares are going to be worth when it comes time to sell, and America could be on the losing end.

The reason for the conversion is, in essence, to make the TARP money go a little further. Converting those loans to common shares would turn the federal aid into available capital for a bank — and give the government a large ownership stake in return, reports Edmund L. Andrews for The New York Times. Additionally, it would provide additional capital to major banks at no additional cost.

Invesco PowerShares’ Senior Vice President of Portfolios Strategies Ed McRedmond said the PowerShares Financial Preferred (PGF) saw some benefit as Americans grew more concerned about the health of the nation’s banks.

“When the government came in and invested capital through the preferred shares, we saw activity in the preferred ETFs increase.”

In fact, both of PowerShares’ preferred ETFs (the other is PowerShares Preferred (PGX)) have seen positive inflows since the financial mess intensified.

“Year-to-date, you’re talking a few hundred million dollars into the funds. Even last year, they saw positive net inflows,” McRedmond says.

Year-to-date, PGF has seen $276 million in net inflows.

Part of the rush of inflows was because of last year’s suspension of financial stock short-sales. “All of a sudden, you had institutional investors and hedge funds looking for ways to trade financial markets.”

Preferred stock can be more appealing to investors who want financials exposure, but are wary of how beaten-down the sector has become.

“People might not have been comfortable buying the common stock, but they wanted to have a way to gain exposure to the sector for any recovery, while earning a dividend,” McRedmond says, noting that many financials have eliminated or reduced dividends on their common stock.

Another reason the preferred financial stock might have gotten a boost is because big-name investing gurus such as Pimco’s Bill Gross highlighted the fact that investors should go where the government goes.

“It sparked a great deal of interest when Bill Gross said he was buying bank preferred stocks.”

• PowerShares Financial Preferred (PGF): down 9.5% year-to-date

During this crazy bear market and market meltdown, optimistic investors have been turning to dividend-rich exchange traded funds (ETFs) to answer their prayers. But what if the funds have lost more than what they yield? What’s the point of them then?

One reader of ours wonders:

Can someone please explain to me why ETFs that have lost more over the last month than their dividend yield would be attractive?  Or stocks for that matter?  Isn’t this yield only attractive if you think they have bottomed? Is there something I am not getting about dividend stocks??

The answer: Dividend yields on a particular market segment are a concrete measure of the market’s valuation levels-whether those stocks are offering attractive terms to entice you to invest in them compared to their competing asset classes.

Stocks’ biggest competition comes from either cash or bonds. The short term returns on money markets are at or near zero today. The 10-year U.S. government bond is yielding under 3%, the lowest level in more than 50 years.

These low yields in bonds offer the least enticing terms this century for bonds, and the primary reason investors are accepting these low yields today is an extreme amount of risk aversion about losing money in stocks.

The Dividend Yield on a basket of large cap us dividend stocks measured relative to the dividend yield on the S&P 500 is also another valuation measure to gauge the attractiveness of the dividend basket.

Of course, the market always could move more in the short term than the dividend yield offers you. But owning stocks was never supposed to be a risk free proposition, and we believe having strong underlying valuation metrics such as the dividend yield underpinning your investment is the best way to minimize that risk.

Simon Maierhofer for ETF Guide notes that double-digit capital gains in 2008 pushed dividends to the back burner. As the Dow Jones Industrial Average and S&P 500 touched on new highs in 2007, dividends were simply a moot point to most investors.

But now, investors are hungrily on the hunt for yield again. Here are nine ETFs delivering such yields:

• iShares FTSE NAREIT Retail ETF (RTL): which got slaughtered in 2008, but shoots of an impressive yield of 13.6%
• PowerShares Financial Preferred Portfolio (PGF), we all know how well this sector performed last year, but PGF yields 13.6%
• iShares S&P U.S. Preferred Stock ETF (PFF), a yield of 10.8%
• iShares iBoxx High Yield Corporate Bond ETF (HYG), producing a yield of 10.6%
• PowerShares Insured National Municipal Bond Portfolio (PZA), a 5% yield, but keep in mind that this yield is partially tax-free
• iShares DJ Select Dividend ETF (DVY), a fairly well-established ETF that has a generous exposure to financials and generates a yield of 6.9%
• State Street’s S&P Dividend ETF (SDY), shooting off a yield of 6.3%
• SPDR DJ Wilshire Large Cap Fund (ELV), producing a modest yield of 5.1%
• iShares Russell 1000 Value ETF (IWD), generating a yield of 4.2%

Although these yields are very tempting, remember that the markets have really taken a hit in the last year.  Remember to watch the trendlines and do your homework before throwing any extra change into the market.

Although last week the financial sector was one of the ETF market leaders, betting on a bull market in the sector is premature, reports Michael Kahn for Barrons.

Even if the financial bottom has hit, the recovery time is a long way coming, so do not get caught up in headlines and media hype. Mortgage rates could fall a bit at first, but not enough to save the decline in prices just yet. Some late borrowers may get saved and end up with lower payments, and mortgage rules may be different, reports Ron Lieber for The New York Times.

Congress is weighing what the next step for the two will be: privatize, nationalize or nothing at all. Treasury Secretary Henry Paulson said the next few months should be a “time out.” He acknowledges that a decision on what to do before the end of the year, though, is unlikely, reports Julie Hirschfeld Davis for the Associated Press.

The bottom line is that nobody really knows what this bailout will mean. All that is certain is that taxpayers might be underwriting most of the cost of doing so. This unanticipated bailout has never been done before, so there is no way to tell the outcome. Here are some hypothetical scenarios of what could happen:

• Nothing changes for fixed mortgages, but new mortgages and re-finances may get easier with stabilized rates at a quarter point less or so.
• Fees will be re-examined for the mortgage affordability factor.
• Home prices may lower as the job market has cooled, and the number of homes for sale grow. Rate stabilization can only help get more buyers into the market.
• A more intense homeowner bailout may go into effect to help troubled home owners with adjustable rate mortgages.
• Shareholders of Fannie and Freddie may not get wiped out completely, but the focus is not on the shareholders anymore, as Paulson says.

ETFs that are in the line of fire:

• Financial Select Sector SPDR (XLF),  down 21.8% year-to-date
• KBW Regional Banks (KRE), down 2.4% year-to-date
• PowerShares Financials Preferred (PGF), down 2.3% year-to-date

Treasury Secretary Henry M. Paulson said that the government’s focus right now is supporting the companies in their current form, reports Michael M. Grynbaum for the New York Times. Naturally, the markets didn’t like that idea. The companies currently operate with an implied, but not assured, government guarantee.

While the shares are declining, investors seem to feel that the government will step in and guarantee any outstanding obligations. Officials are already considering having a plan to take over one or both of the companies and place them in a conservatorship. If that happens, their shares will be worth next to nothing, and any losses on mortgages would be paid by taxpayers.

The two companies are the largest buyers of home loans in the country, and as such, the provide liquidity to housing markets, says Bill Seidman for NPR. If they were to go under, it could make the current credit crisis look like a hiccup.

As might be expected, financial ETFs are trading lower this morning:

• PowerShares Financial Preferred Portfolio (PGF), down 6.1% year-to-date
• iShares Dow Jones U.S. Financial Services Index Fund (IYG), down 34.8% year-to-date
• Financial Select Sector SPDR (XLF), down 32.3% year-to-date
• KBW Bank (KBE), down 35.1% year-to-date