The U.S. economy ended the worst year of employment losses since the Great Depression with an unexpectedly large new drop of 85,000 jobs in December - dimming hopes of a quick upswing in hiring and intensifying Washington's partisan fight over how to create more opportunities for workers.

The unemployment rate for the month was unchanged from November at 10 percent, the government said Friday, but that was only because droves of people, including many discouraged about the prospects of finding work, dropped out of the labor force and weren't counted as unemployed.

"The increased number of discouraged workers is masking the true extent of joblessness," said Anne Kim, economic program director at Third Way, a liberal policy think tank in Washington.

The latest report was all the more disappointing because the employment data for November raised hopes the steep two-year-long employment decline had hit bottom. And revised figures released Friday by the Bureau of Labor Statistics showed the economy actually added a net 4,000 jobs in November instead of losing 11,000 as initially estimated.

But in December, there were once again large payroll cuts in construction and manufacturing as well as smaller losses in other industries. And job increases in health and education services, and the temporary-help industry, were not large enough to offset them.

Many economists had projected the December report would show essentially zero job growth, with some forecasting a small increase that would be the beginnings of a robust recovery in hiring in the not-too-distant future.

Although administration officials cautioned that the overall unemployment numbers might get worse before the hoped-for turnaround, President Barack Obama, speaking Friday at the White House, said overall job trends were still promising. When he took office in the first quarter of last year, the nation lost an average of 691,000 jobs a month. That fell to 69,000 monthly job losses in the fourth quarter.

The latest employment numbers "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," the president said. "For most Americans, and for me, that means jobs."

Republican leaders pounced on Friday's report to attack the Obama administration's deficit spending and economic policies, as they did throughout the last year, while liberal groups insisted that this was not the time to pull back from stimulus programs aimed at spurring job growth and helping the millions of unemployed Americans with safety net programs.

"There's no way around saying it was something of a setback from what we had seen in November," Christina Romer, chair of the White House Council of Economic Advisors, said in an interview. By the latest tally, the economy already has shed about 7.3 million jobs since December 2007 - almost half of them since President Obama's $787 billion economic stimulus program was passed last February. And next month the government's annual "benchmark" revisions of jobs data are likely to show that payrolls actually fell by about 8 million in the last two years.