Media playback is unsupported on your device Media caption President Obama: "We've added 3.2m new private sector jobs over the last 22 months"

The US economy created 200,000 jobs in December, marking the sixth month in a row of gains, official figures show.

The rise was much more than expected. Analysts had forecast an increase of about 150,000 jobs.

The unemployment rate dropped to 8.5%, which was the lowest level in nearly three years, from a revised 8.7% in November, the Labor Department said.

Large job gains were seen in retail, manufacturing, transportation and warehousing and healthcare.

For 2011 as a whole, some 1.6 million jobs were created, which was the highest since 2006, led by rises in the private sector.

Employment in the private sector rose by 212,000 in December and by 1.9 million over the year.

'Showboating'

Government employment was little changed in December but was down by 280,000 over the year.

Analysis Today's economic figures are the best news that US President Barack Obama has had for a while. There is still a grave danger that the recovery in the US could be blown off course by ill winds from Europe. But after a year when the American economy seemed stuck in the doldrums, it finally seems to be moving in the right direction. This is not going to be an election year when voters are bathed in the warm glow of a feel-good factor. But a recovery, even a gradual, slow one that doesn't make many people feel better off, goes some way to undermine Republican arguments that President Obama is a total failure. Of course, a slight recovery won't, and shouldn't, stop them arguing that their policies would lead to an even faster recovery. But it makes their argument a little harder. Read more of Mark's thoughts

The unemployment rate had remained stubbornly high at about 9% for several years, peaking at 10.1% in October 2009. But December marked the fourth month in a row that it had fallen, after routine updates were made to previous months' data at the end of the year.

However, November's figure was revised up slightly from 8.6% to 8.7%.

The euro, which has fallen sharply against the dollar in recent days, continued its decline after the better-than-expected jobs report.

On Friday the euro fell under $1.27 for the first time since September 2010.

However, the jobs report failed to bolster Wall Street, with the Dow Jones and S&P 500 indexes closing lower on continuing worries about the eurozone debt crisis.

But the fall in the unemployment rate will come as a welcome boost to President Obama who is bidding for re-election this year.

He said the report showed that the US economy was "moving in the right direction. We are creating jobs".

Marcus Bullus, trading director at MB Capital, said the data would "cheer everyone bar Republican spin doctors".

"The Obama administration could be forgiven for showboating over this convincing evidence that America's economy is pulling away from Europe's," he said.

But he added: "From a market perspective, strong US data like this will add to optimism, but nobody doubts the considerable downward pressure the eurozone will continue to place on the global marketplace during 2012."

Some 28,000 jobs were created in retail in December, 23,000 in manufacturing, and 23,000 in healthcare.

The transportation and warehousing sector was boosted by a rise of 42,000 jobs in the couriers and messengers industry, although the Labor Department said that seasonal hiring had been particularly strong.

"At first glance, [it] looks like the trend is going in the right direction. The number might be suspect, but if we get a second month of hiring like this, that will suggest a stronger trend," said Frank Davis, director of sales and trading at LEK Securities in New York.

"But there's still a long way to go until the labour market is strong, and there's still a lot that could happen with Europe."