WASHINGTON: Hopes for a quick US economic rebound were dashed as data showed US employers cut 85,000 jobs in December while the unemployment rate held at 10.0 percent.

Analysts said the report highlighted a slow and painful recovery from recession, while President Barack Obama on Friday said it shows "that the road to recovery is never straight."

The Labor Department report on nonfarm payrolls was far worse than the consensus expectation for no change in overall employment levels.

The unemployment rate meanwhile was in line with expectations, remaining near its highest level since the 1980s, but also reflected a large number of people dropping out of the workforce.

In revising data for prior months, the data showed a net gain of 4,000 jobs in November instead of a loss of 11,000 previously reported, the first positive month after 22 months of losses.

Obama said the report highlights the need for more efforts to create jobs.

The figures "are a reminder that the road to recovery is never straight and that we have to continue to work every single day to get our economy moving again," Obama said as he unveiled plans for tax credits for "green jobs."

Still, he said the employment picture is better than when he began as president, when the economy was shedding some 700,000 jobs per month.

"The overall trend of job loss is still pointing in the right direction," he added.

Economists said the news was disappointing but consistent with a gradually healing economy.

"We're getting a steady but very slow improvement in the job market," said Robert MacIntosh, economist at Eaton Vance.

"We are going to have to get used to a frustratingly high unemployment rate."

Cary Leahey, senior economist at the research firm Decision Economics, called the data consistent with a still-sluggish economy.

"The labor market is struggling and is stuck in the water," he said.

"You are seeing gains in output and manufacturing because of liquidation of inventories... but we haven't seen a decisive turn in the labor market."

The world's biggest economy expanded at a 2.2 percent pace in the third quarter after four quarters of decline in the worst recession in decades.

Most analysts expect continued growth for the fourth quarter and 2010 but say recovery could be held back by unemployment, which hurts consumer spending and confidence.

"It is starting to look like those in the U-shaped recovery camp are in better shape than those in the V-shaped recovery camp," said Ian Pollick, economics strategist at TD Securities.

"While the worst of the recession is likely over, the fact that the duration of unemployment remains rigid is a concern, though a silver lining is that we are likely to see net job creation assisted by census hiring in the first quarter of 2010."

The December report showed the goods-producing sector shed 81,000 jobs including 27,000 in manufacturing and 53,000 in construction.

The services sector lost a modest 4,000 jobs, with a loss of 10,000 in retail offset by gains in education, health care and professional services. Government sector employment fell by 21,000.

Average hours worked, sometimes seen as a proxy for economic activity, was unchanged in December. Average hourly earnings meanwhile rose 0.2 percent.

The civilian labor force fell by 661,000 in the month, suggesting that more people are stopping their search for employment.

"The unchanged unemployment rate of 10 percent understates labor market slack, since labor force participation fell sharply," said Sophia Koropeckyj at Moody's Economy.com.