The United States unemployment rate fell last month to its lowest level in more than two and a half years, as employers stepped up hiring in response to the slowly improving economy.

The Labor Department says the unemployment rate dropped sharply to 8.6 percent last month, down from 9 percent in October. The rate hasn't been that low since March 2009, during the depths of the recession.

Still, one reason the unemployment rate fell so much was because roughly 315,000 people gave up looking for work and were no longer counted as unemployed.

Private employers added a net gain of 140,000 jobs last month. Governments, meanwhile, shed another 20,000 jobs, mostly at the local and state level. Governments at all levels have shed almost a half-million jobs in the past year.

More than half the jobs added were by retailers, restaurants and bars, a sign that holiday hiring has kicked in. Retailers added 50,000 jobs, the sector's biggest gain since April. Restaurants and bars hired 33,000 new workers. The health care industry added 17,000.

As Europe's financial crisis threatens to slow US growth next year. A recession in Europe could reduce US exports, hurt global financial markets and dampen business confidence.

Paul Ashworth, an economist at Capital Economics, estimates that the economy will expand 2.5 percent in the last three months of this year. But he expects growth to slow to 1.5 percent in 2012, partly because of the crisis in Europe. And if Congress fails to extend the Social Security tax cut and long-term unemployment benefits this month, growth is likely to slow even further.

In the past three months, the economy has added an average of 143,000 net jobs per month. That's enough to keep up with population growth and better than the previous three months, when the economy averaged just 84,000.

Factory output expanded last month. Retailers reported a strong start to holiday sales over the Thanksgiving weekend, consumer confidence surged in November to the highest level since July, and Americans' pay rose in October by the most in seven months.

Car sales also rose sharply in November, normally a lackluster month for the auto industry. Chrysler, Ford, Nissan and Hyundai all reported double-digit gains on Thursday, compared to a year ago.