* Bond yields rise after employers add more jobs than expected * Fed still seen likely to announce new bond purchases next week * Treasury to sell $66 bln in 3, 10, 30-year debt next week By Karen Brettell NEW YORK, Dec 7 (Reuters) - U.S. Treasuries yields spiked on Friday after U.S. employers added more jobs than expected in November, though a drop in the labor market participation rate suggested the economy continues to struggle. Nonfarm employment increased by 146,000 jobs last month, the Labor Department said, defying expectations of a sharp pull-back related to superstorm Sandy. The jobless rate fell to 7.7 percent last month, the lowest since December 2008. But the drop was because people gave up the search for work, which does not bode well for the economy. "It's stronger than expected on the surface but the unemployment rate fell for the wrong reasons," said Richard Gilhooly, interest rate strategist at TD Securities in New York. "The central case that the Fed is going to do QE is unchanged." Benchmark 10-year notes were last down 7/32 in price to yield 1.61 percent, up from 1.59 percent late on Thursday. Thirty-year bonds dropped 20/32 in price to yield 2.81 percent, up from 2.77 percent. Treasuries have gained in recent sessions on expectations the Federal Reserve will announce that it will make new bond purchases when it meets next week. The Fed's current Operation Twist program, which involves buying longer-dated debt and funding the purchases with sales of short-dated notes, is due to expire at the end of the year. Traders then expect the Fed will turn to outright purchases of Treasuries as it runs out of short-dated debt to sell. Fed bond purchases as part of Twist have also helped support Treasuries this week. Auctions of $66 billion in new three-year, 10-year and 30-year bonds next week, however, are expected to drag on bonds in the next few sessions. "In general I would imagine a general discount moving into next week to take down the supply," said Tom Tucci, head of Treasuries trading at CIBC in New York. "We traded earlier in the week higher than we should have because the Fed was buying every day and there wasn't any supply coming into the market," he said. The Treasury will sell $32 billion in three-year notes on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday. Treasuries showed little reaction to a survey showing Americans' outlook on the economy and their finances took a turn for the worse in early December.