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A string of better-than-expected U.S. data in recent weeks has highlighted a contrast between the recovery in the world's biggest economy and Europe, where the economy is widely believed to be contracting.

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The jobs data was overshadowed in financial markets by concerns over Europe's debt crisis. U.S. stocks ended mostly down, while Treasury debt prices rose on safe-haven bids.

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The economy added 1.6 million jobs last year, the most since 2006, and the jobless rate, which peaked at 10 percent in October 2009, has dropped 0.6 percentage point in the last four months.

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"We're moving in the right direction. When Congress returns they should extend the middle-class tax cut for all of this year, to make sure we keep this recovery going," he said.

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Employment remains about 6.1 million below its pre-recession level and at December's pace of job growth, it would take about 2-1/2 years to win those jobs back. There are roughly 4.3 unemployed people for every job opening.

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Unseasonably mild weather last month helped fuel a hefty gain in construction employment. Courier jobs also rose sharply, a move the Labor Department pinned on strong online shopping for the holiday season.

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A broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, dropped to an almost three-year low of 15.2 percent from 15.6 percent in November.

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New York Federal Reserve Bank President William Dudley on Friday suggested the U.S. central bank was still leaning toward buying more bonds to pull borrowing costs lower, describing the recovery as "frustratingly slow" and the unemployment rate as "unacceptably high."

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Government employment contracted 12,000, with most of the drag coming from local government layoffs. However, the pace of government job losses is moderating as some states report revenue growth after years of being in the red.

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For all of 2011, the private sector added 1.9 million jobs, while government employment fell 280,000. A measure of the share of industries that showed job gains during the month rebounded to a five-month high in December after diving in November.

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Transportation and warehousing employment jumped 50,200. The bulk of the rise came from the messenger industry, which added 42,000 jobs, reflecting an increase in deliveries of online purchases made during the holiday season.

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Manufacturing jobs rose 23,000, the largest increase since July. Factory employment rose 225,000 last year, sustaining gains for the first time since 1997.

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