US government figures show that the country's economy created far fewer jobs that expected in December, though the unemployment rate dropped to its lowest level in more than 18 months.

Employment increased by 103,000, the Labor Department, below economists' expectations for 175,000. Private hiring rose 113,000, while government employment by fell 10,000.

Meanwhile, US Federal Reserve chairman Ben Bernanke today warned that the current 'insufficient' rate of job creation meant a 'considerable time' will be needed to put the jobs market right.

Today's figures show that overall employment for October and November was revised to show 70,000 more job gains than previously reported. The unemployment rate fell to 9.4%, the lowest since May 2009, from 9.8% in November.

Economists had raised their employment forecasts after pay processing company ADP Employer Services said on Wednesday that private employers added 297,000 jobs in December -- the largest gain on ADP records dating to 2000.

US Federal Reserve officials will consider the jobs report when they meet on January 25-26. Signs of strength in the economic recovery had led to calls for the Fed to scale back its widely criticised $600 billion government bond-purchasing programme aimed at keeping interest rates low to boost demand.

The economy usually needs to create at least 125,000 jobs a month to keep the unemployment rate from rising, but a faster pace might be needed now since so many discouraged workers are sitting on the sidelines. As job growth picks up, these workers could re-enter the labour force, keeping upward pressure on the jobless rate.

Employment gains in December were led by the private services sector, which saw employment rising 115,000 after gaining 84,000 in November. Retail jobs increased 12,000 after a surprise 19,400 slump in November when retailers reported their best sales in years.

Temporary hiring, seen as a harbinger of permanent employment, increased 15,900 after 31,100 in November. The goods-producing sector shed 2,000 jobs in December after losing 5,000 in November, but manufacturing payrolls rose 10,000. Construction employment fell 16,000 after slipping 2,000 in November.

Bernake warns of long unemployment fight

US Federal Reserve chairman Ben Bernanke today warned that the current 'insufficient' rate of job creation meant a 'considerable time' will be needed to put the jobs market right.

'The economic recovery that began a year and a half ago is continuing,' the Fed boss said in prepared testimony to Congress, 'although, to date, at a pace that has been insufficient to reduce the rate of unemployment significantly.'

'Considerable time likely will be required before the unemployment rate has returned to a more normal level,' he added.