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

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.