US unemployment rate drops to 8.5 per cent

The US unemployment rate has fallen to its lowest level in nearly three years, giving the economy a boost at the end of 2011.

The Labour Department said employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5%, 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 has not 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 the Second World War.

Unemployment was 7.8 % when Obama took office in January 2009.

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% last year, down from 9.6% 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.

AP