Growth in manufacturing jobs helped offset a loss in government positions, while wages edged higher and the length of the work week also lengthened a bit.

The unemployment rate — a hotly contested number because of the rise in potential workers who have quit looking for jobs — has fallen 0.6 percentage points since August.

However, an alternative measure of unemployment that counts discouraged workers also dropped sharply. The so-called U-6 number, more encompassing than the headline number the government publicizes, dropped to 15.2 percent from 15.6 percent in November.

"Overall the report was pretty solid through and through," said Brad Sorensen, director of market and sector analysis at Charles Schwab in San Francisco. "This helps to continue the snowball rolling downhill, as the more people hired and the more people working increases demand. Employers have to hire to meet that demand. It gets the ball rolling and we are starting to see a self-sustaining expansion phase take hold."

The labor-force participation rate, considered another key metric regarding optimism in the workforce, was unchanged at 64 percent. The average duration of unemployment remains near a record high at just under 41 weeks, though the number of those unemployed for 27 weeks or longer fell by 92,000.

Those not in the workforce at all finished 2011 at an annualized record high, but even that measure fell in December to 2.54 million, a drop of about half a million.

Job gains came from a variety of quarters: Transportation and warehousing surged by 50,000, the couriers and message industry rose 42,000, and retail added 28,000. Manufacturing grew by 23,000 and the hospitality industry continued its brisk pace, adding 24,000 jobs in December and 230,000 over the past year at food and drinking establishments.

"To be sure, manufacturing gains remain lackluster and gains in construction still await some awakening in the housing market," said Kathy Bostjancic, director of macroeconomic analysis at The Conference Board. "But there has been enough retail activity to allow the service-sector to show moderate and sustained job gains."

Economists had been looking for a number in the 175,000 range as both Wall Street and Main Street search for signs that the labor market is thawing. November saw a downwardly revised gain of 100,000 jobs and an unexpected fall in the unemployment rate from 9.0 percent to 8.7 percent.