The United States economy created 200,000 jobs in December, marking the sixth consecutive month of gains.
The rise was more than expected. Analysts had forecast an increase of about 150,000 jobs.
The Labor Department said the unemployment rate dropped to 8.5%, which was the lowest level in nearly three years, from a revised 8.7% in November.
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.
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
Government employment was little changed in December, but was down by 280,000 over the year.
The unemployment rate was at about 9% for several years, peaking at 10.1% in October 2009.
But December marked the fourth consecutive month 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%.