The US economy created 378,000 jobs in December as the unemployment rate dipped to 4.3 per cent from 4.4 per cent in November, the Labour Department reported yesterday.

The December report was far stronger than expected. Wall Street analysts had forecast the creation of 200,000 non-farm payroll jobs and an unemployment rate of 4.5 per cent.

Analysts said the December performance suggested that US economic growth, which came to 3.7 per cent in the third quarter, may be more robust in the fourth quarter.

In addition, according to Mr William Sullivan of Morgan Stanley Dean Witter, the US Federal Reserve could now be induced to consider a tightening in monetary policy after three recent interest rate cuts.

Average hourly earnings, closely watched as an indicator of wage-driven inflation, rose 0.4 per cent from November and were up 3.8 per cent year-on-year.

The one negative note in the report was the manufacturing sector, hard hit by the Asian crisis, which lost 13,000 jobs last month. Since March the manufacturing sector has lost 272,000 jobs.

Non-farm payroll employment rose by a revised 251,000 jobs in November, compared with the previous estimate of an increase of 267,000 jobs. For the entire year, the economy created 2.9 million jobs, compared with 3.4 million in 1997, the department said. Construction employment rose by 104,000 jobs in December, the largest gain since February 1984. Employment rose by 111,000 jobs in the services industry, 88,000 on the goods producing sector and 53,000 in retail trade. Government employment rose by 59,000 jobs in the month. In the separate household survey, the number of unemployed persons fell by 59,000 to 6.02 million in December. The civilian labour force rose by 354,000 to 138.5 million. Total employment rose by 413,000 to 132.5 million.