By CHRISTOPHER S. RUGABER
AP Economics Writer
WASHINGTON (AP) - The nation's economy added 103,000 jobs in December and the unemployment rate dropped to 9.4 percent last month, its lowest level in 19 months.
But the job growth fell short of expectations based on a strengthening economy. And the drop in unemployment was partly because people stopped looking for work.
Private employers added a net total of 113,000 jobs last month and the government shed 10,000 jobs, the Labor Department said Friday.
"It's a bit of a mixed bag," said Ryan Sweet, an economist at Moody's Analytics. Many analysts hoped to see larger job gains, and the drop in the unemployment rate is unlikely to be sustained, he said.
"The labor market ended last year with a bit of a thud," he said. "But I think things will get much better this year."
The economy has shown signs of steady improvement in recent weeks, leading many economists to expect more job creation. The Labor Department said Thursday that fewer people applied for unemployment benefits over the month than in any four-week period in more than two years. An increase in consumer spending made this past holiday season the best in four years.
There were positive signs in the December jobs report. Government revisions showed more people were hired in previous months than the government first estimated. The economy added 210,000 jobs in October, above the previous figure of 172,000. November's total was revised to 71,000, up from 39,000.
President Barack Obama said the new jobs report shows the economy is moving in the right direction. But he acknowledged that hiring and growth must still accelerate.
Over the past three months, the economy has added an average of 128,000 jobs. That's just enough to keep up with the population growth. Nearly double is generally needed to significantly reduce the unemployment rate.
But other factors can affect the unemployment rate, at least temporarily. One key reason for the drop was that the government no longer counts people as unemployed when they stop looking for work.
Fewer people said they were out of work last month. The number of unemployed fell by more than 500,000 to just under 14.5 million, the lowest since April 2009.
Still, the unemployment rate has topped 9 percent for 20 months, the longest such streak on record. And even with last year's job gains, the unemployment rate fell only from 9.7 percent to 9.4 percent.
Stocks edged lower after the disappointing report was released The Dow Jones industrial average fell more than 44 points in midday trading.
Through all of 2010, the nation added 1.1 million jobs, or an average of 94,000 jobs a month.
Economists expect hiring will ramp up this year, with some predicting double last year's total of jobs or more. A tax cut package that goes into effect this month should boost consumer and business spending.
Federal Reserve Chairman Ben Bernanke offered a more optimistic outlook for the economy during testimony before the Senate Banking Committee. Still, Bernanke said it could take four to five years for unemployment to drop to a historically normal rate of around 6 percent.
"Persistently high unemployment, by damping household income and confidence could threaten the strength and sustainability of the recovery," he warned.
The health care and leisure and hospitality sectors showed the strongest job gains last month. Health care added about 36,000 jobs, while restaurants and hotels hired more than 29,000 new workers.
Retailers added 12,000 net new jobs, after shedding jobs the previous month. Manufacturers hired a net total of 10,000 new workers, after losing jobs for four straight months. The bleeding continued in construction, which cut 16,000 jobs.
Companies hired nearly 16,000 temporary workers, the fewest since July.
Including those who are working part time but would prefer full-time work, and those who have given up looking for work, the underemployment rate was 16.7 percent last month. That's down from 17 percent in November.
The average work week didn't increase, remaining at 34.3 for the third straight month. But average weekly earnings ticked up by just over a dollar, to $781.35. The additional jobs and slightly higher pay translates into a modest gain in incomes, economists said, which could bolster future spending.