The U.S. economy had a net gain of 200,000 jobs in December, while the unemployment rate dropped to the lowest level since early 2009.

Friday's report from the Labor Department says the jobless rate fell two-tenths of a percent to hit 8.5 percent.

All of the job gains were in the private sector, particularly transportation, retail, manufacturing, and health care. Employment continued falling in state and local governments which cut another 12,000 jobs.

This is the sixth month in a row that the economy has gained at least 100,000 jobs, but those gains have not yet made up for the eight million jobs lost during the recession.

The number of people who want full-time work, but who can find only part time jobs declined by hundreds of thousands, but remains at 8.1 million. Some out-of-work people are not counted as officially unemployed because they have given up their job hunt in the belief there is no work for them. The number of such “discouraged workers” has fallen over the year by a bit less than 400,000 in 2011 and stands at 945,000 nationwide.

High unemployment has made the economy a key issue in this year's presidential election campaign.