Nonfarm payroll employment rose in December and the nation's unemployment rate fell to 8.5%, which is the lowest rate in nearly three years. The Labor Department said the economy added 200,000 jobs last month with modest growth in transportation and warehousing, retail trade, manufacturing, health care and mining. Analysts surveyed by Econoday expected 150,000 new jobs in December with a range of estimates between 110,000 and 200,000. Private-sector employment rose by 212,000 last month and government jobs dropped by 12,000. Ryan Sweet, senior economist for Moody’s Analytics, expected 160,000 new nonfarm payroll jobs in December with 175,000 new private-sector jobs. The Labor Department said 1.6 million new jobs were added to nonfarm payrolls in 2011, while government employment declined by 280,000 over the 12 months. Employment in state and local government has been declining since the second half of 2008. About one quarter of December's gains came from new transportation and warehousing jobs, most of which were couriers and messengers. And the Labor Department said seasonal hiring was particularly strong last month. Construction employment changed little in December, although nonresidential specialty contractors added 20,000 jobs over the month, offsetting losses of the prior two months. The Labor Department revised gains in nonfarm payrolls for November to 100,000 from 120,000 and to 112,000 from 100,000 previously reported for October. "Part of the improvement in the labor market may be due to warm weather in much of the country that distorted normal seasonal patterns in some industries, but combined with improvement in other recent indicators, including home sales, this report shows the economy is entering 2012 with some wind at its back," according to Fannie Mae Chief Economist Doug Duncan. He also said the encouraging job report "does not change the underlying picture of the recovery as too modest to result in a rapid healing of the housing market." The number of unemployed Americans fell to nearly 13.1 million in December from 13.32 million the prior month, with the long-term unemployed, or those without jobs for 27 weeks or more, dropping to 5.59 million from 5.68 million in November. After climbing to 9.8% in November 2010 the unemployment rate hovered at or near 9% for most of 2011, before dropping to 8.7% in November and falling again the final month of the year. Earlier this week, Automatic Data Processing Inc. said pivate-sector employment grew by 325,000 jobs in December when compared to the previous month. According to the ADP National Employment report, which is compiled in conjunction with Macroeconomic Advisors, the number of new jobs in November was revised down slightly to 204,000 from 206,000. Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw.