* Yields have biggest one-day jump since January * February, March payroll growth revised up * Decline in unemployment rate not due to workers dropping out By Ellen Freilich NEW YORK, May 3 (Reuters) - U.S. Treasuries prices fell on Friday and yields made their biggest one-day jump since January after the government reported job growth that topped the market's subdued forecasts. The unemployment rate fell to a four-year low of 7.5 percent in April, the U.S. Labor Department said, while nonfarm payrolls added 165,000 jobs last month. Economists polled by Reuters had expected April payrolls to rise by 145,000 and the unemployment rate to hold steady at 7.6 percent. The healthier-than-expected job picture caused the U.S. 30-year Treasury bond, the maturity that most reflects the long-term inflation outlook, to fall more than 2 points. Its yield rose to 2.94 percent from 2.83 percent on Thursday. The benchmark 10-year Treasury note fell a point, its yield rising to 1.74 percent from 1.63 percent late on Thursday, the biggest single-day jump since Jan. 25. Upward revisions in nonfarm payroll growth to 138,000 for March - 50,000 more jobs than first reported - and an upwardly revised February gain of 332,000, the largest increase since May 2010, strengthened the impression of steady job growth. In addition, the drop in the unemployment rate last month reflected an increase in employment, rather than people leaving the work force, the Labor Department said. "The market got it wrong once again," said Payden & Rygel senior economist Jeffrey Cleveland. "Everyone was set up for a more gloomy employment report given the recent run of economic data and the chatter about the Fed possibly increasing the size of their purchases," he said, referring to the Fed's recent statement that it could decrease or increase the size of its large-scale asset purchase program as needed. "Instead, the data was a little better than expected," Cleveland said. "It ebbs and flows, but we have had moderate employment growth and this report was in line with that." The better-than-expected April payroll growth and upward revisions to growth in February and March - plus the employment growth seen in the household survey that drove the unemployment rate down 0.1 point to 7.5 percent - "troubled" the bond market and sent yields up toward the higher end of their "micro-range," said William O'Donnell, RBS Securities head Treasury strategist in Stamford, Connecticut. Meanwhile, the timely Institute for Supply Management's non-manufacturing index came in a little weaker than expected, but still reflected expanding activity in April. Steve Blitz, chief economist at ITG Investment Research in New York, said market sentiment was much more volatile than the actual underlying economic fundamentals. "There's a tendency for market sentiment to swing from too euphoric to too pessimistic," he said. "It's like following a .500 baseball team. If they win seven out of 10 games, it looks like they are going to the World Series and when they lose seven out of 10 games it looks as if they will never win another game. When, in reality, when you look at the whole season, they are winning half the time and losing half the time. I see nothing in the data we look at to indicate the economy is about to break out in either direction - either faster or slower." April's employment data also cooled, at least for now, talk of the Fed increasing the size of its large-scale asset buying program, known as quantitative easing, an unconventional method of providing monetary accommodation when short-term interest rates have already been cut to near zero. "That discussion about the Fed increasing its purchases has to be shelved for now," Cleveland said. The data pulled yields up from 4-1/2-month lows, but the 30-year Treasury yield remained below 3 percent and the 10-year yield well below 2 percent. "There's no inflationary pressure," Cleveland said. "You'd need to see above-trend growth and a breakout in inflation to send yields much higher. Payroll growth would have to accelerate to above 200,000 a month. Job growth now is pretty much the same as it was a year ago relative to the working age population."