The Labor Department said Friday that employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5 percent, the lowest since February 2009. The rate has dropped for four straight months.
The hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That hasn't happened since April 2006.
"There is no question that today's employment report is a positive and there is also no question that the pace of job growth has accelerated of late," said Dan Greenhaus, an analyst at BTIG LLC, a brokerage firm
A better job market is a positive sign for President Barack Obama, who is bound to face voters with the highest unemployment rate of any sitting president since World War II. Unemployment was 7.8 percent when Obama took office in January 2009.
Still, the level may matter less to his re-election chances if the rate continues to fall. History suggests that presidents' re-election prospects hinge less on the unemployment rate itself than on the rate's direction during the year or two before Election Day.
For all of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9 percent last year, down from 9.6 percent the previous year.
Economists forecast that the job gains will top 2.1 million this year.
The December report painted a picture of a broadly improving job market. Average hourly pay rose, providing consumers with more income to spend. The average work week lengthened, a sign that business is picking up and companies may soon need more workers.
And hiring increased across most major industries.
Manufacturing added 23,000 jobs, as did the health care industry. Transportation and warehousing added 50,000 jobs. Retailers added 28,000 jobs. Even the beleaguered construction industry added 17,000 workers.
Economists cautioned that some of the gains reflected temporary hiring for the holiday season. The government adjusts the figures to account for those seasonal factors, but doesn't always fully account for them.
The gains in transportation and warehousing, for example, reflected a strong increase in hiring for couriers and messengers. That could stem from a big jump in online shopping over the holidays, the department said.
The nation's work force, which includes both people working and those searching for jobs, shrank slightly last months and is little changed from this spring. That's a concern because a strengthening job market normally draws more applicants.
The work force has declined by about 160,000 over the past two months, one reason the unemployment rate has fallen.
"You have to take that unemployment rate decline with a grain of salt when you look at the declines in the labor force," said Marisa DiNatale, an economist at Moody's Analytics.
The government only counts people as unemployed if they are actively searching for jobs. Discouraged workers who have given up on looking are not included in the rate.
And some of those who are counted as employed are working part time, but want full-time work.
When including those groups, the broader "underemployment" rate was 15.2 percent. That's down from 15.6 percent the previous month, but still high. The figure has dropped for three straight months.
And the job market has a long way to go to recover from the Great Recession. The nation has 6 million fewer jobs that it did in December 2007, when the recession began.
More jobs and higher pay are crucial to helping the economy grow. They could enable shoppers to increase spending, which fuels 70 percent of economic activity.
The economy likely grew at an annual rate of above 3 percent, a healthy pace.
A more robust hiring market coincides with other positive data that show the economy ended the year with some momentum.
Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for U.S. auto sales.
Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.