- Associated Press - Friday, January 6, 2012

WASHINGTON — The nation added 200,000 jobs in December in a burst of hiring that drove the unemployment rate to its lowest in almost three years. The figures raised hopes that the economy might finally be healthy enough to power an even stronger job market.

Four long years after the start of a Great Recession that wiped out 8.7 million jobs, a Labor Department report Friday showed that the past six months have been the strongest for job creation in the United States since 2006.

The December gains, spread in industries throughout the economy and far better than economists had expected, sent the unemployment rate to 8.5 percent, the lowest since February 2009. It has fallen four months in a row.

“There is more horsepower to this economy than most believe,” said Sung Won Sohn, an economics professor at California State University, Channel Islands. “The stars are aligned right for a meaningful economic recovery.”

If economics textbooks and the best hopes of millions of unemployed Americans are confirmed, the economy may be at the start of what is known as the virtuous cycle — a self-sustaining, steadily improving pattern of hiring and spending.

When more Americans are hired, they have more money to spend. And when more money courses through the economy, businesses can justify hiring more people. That leads to more jobs and more demand.

Another pattern, known as the vicious cycle, took hold to devastating effect during the Great Recession. People lost jobs and spent less money, so businesses rang up less sales and were forced to lay off more people.

Finally, the reverse may be happening.

“The labor market is healing,” said Diane Swonk, chief economist at Mesirow Financial. She cautioned that “we still have a long way to go — years — to recoup the losses we have endured.”

Indeed, the economy added 1.6 million jobs for all of 2011. That is better than the 940,000 it added during 2010 — and far better than the 5 million it lost during 2009, the most bruising year of the Great Recession.

But the nation still has 6 million fewer jobs that it did in December 2007, when the recession began. Economists forecast the nation will add 2.1 million this year.

The unemployment report was the first to be released since Republicans across the country began voting to determine a candidate to face President Barack Obama this fall in an election that will turn on the economy.

Obama appears bound to face voters with the highest unemployment rate of any president running for re-election since World War II. Unemployment was 7.8 percent when Obama took office.

But the president’s re-election chances may hinge more on the direction of the unemployment rate. It was 7.2 percent when Ronald Reagan beat Walter Mondale in 1984, but it had fallen from 10.8 percent two years before the election.

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