WASHINGTON - Employment in the United States rose less than forecast in January as retailers cut back after the holidays and government hiring fell.

However, the unemployment rate unexpectedly declined to 6.6%, the lowest level since October 2008, even as more Americans entered the labour force.

The gain of 113,000 in employment followed a revised increase of 75,000 in the prior month, according to Labor Department figures released on Friday today in Washington. The median forecast of economists in a Bloomberg survey called for a 180,000 advance.

Retailers and government agencies cut payrolls by the most in more than a year, while construction firms and manufacturers increased employment.

Broad-based improvement in job growth is needed to help generate bigger wage gains and spur the consumer spending that accounts for almost 70% of the economy.

"We’re making progress but the progress is still slow," said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut.

On many fronts, "the labour market isn't performing in a way that is satisfactory. We've had decent job growth but not a sustained period of strong job growth."

More than half the gains in January employment came from the construction and manufacturing industries, while payrolls among service producers slowed.

The unemployment rate, which is derived from a separate Labor Department survey of households than the payrolls tally, had been forecast to hold at 6.7%, according to earlier surveys.

Unemployment has fallen from a post-recession high of 10%, reached in October 2009.