Unemployment in the U.S. fell to 6.7 percent in December, dipping below 7 percent for the first time since November 2008, when the financial panic was in full swing and President Obama had not yet taken office.

However, most of that improvement came because Americans dropped out of the workforce. The U.S. economy added only 74,000 jobs in the month, the smallest gain since January 2011, falling well short analysts' expectations. Meanwhile, 347,000 Americans stopped looking for work, driving the labor force participation rate to a 37-year low at 62.8 percent.

The Bureau of Labor Statistics reported Friday morning that revisions to previous reports also added 38,000 job to November's numbers, for a total of 241,000.

In another disheartening sign, the average workweek ticked down by 0.1 to 34.4 hours in December, and average hourly earnings were nearly flat, edging up by just 2 cents to $24.17.

"All-around terrible report," tweeted Douglas Holtz-Eakin, the president of the American Action Forum and former director of the Congressional Budget Office.

The poor December numbers may been affected by the month's unusually cold temperatures. In the household survey, separate from the establishment survey used to calculate the total number of jobs added, 273,000 workers said that they had a job but weren't working when surveyed because of the cold weather. That number was up from 37,000 the month before and larger than the average for December.

In particular, 16,000 construction jobs were shed in December. The industry had averaged gains of 10,000 jobs a month throughout the year.

December's report from the BLS caps off data for 2013, a year defined by persistent private sector growth against the background of government fiscal retrenchment, including the March broad-based sequestration budget cuts, and the Federal Reserve's ambitious program to ease monetary policy. Over the year, the U.S. economy grew by 2.2 million jobs and the unemployment rate fell by more than a percentage point, from 7.8 percent. But with December's numbers, job growth slowed pace over the last three months of the year, averaging just over 170,000.

The U.S. economy remains nearly 8 million jobs short of regaining its pre-recession health, the left-leaning economic policy institute estimates. At a pace of job creation of 180,000-200,000 jobs each month, it would take five to six years of continued growth to close that gap, according to the Hamilton Project, another left-of-center think tank.

The unemployment rate understates the weakness of U.S. labor markets because millions of Americans have dropped out of workforce entirely. Since late 2008, the labor force participation rate has fallen from 66 percent to near 63 percent, meaning that a smaller share of Americans are working or at least looking for work.

That decline is partially a reflection of long-term demographic trends, such as baby boomers entering retirement, and partially of workers becoming discouraged by the lack of openings and giving up the job search. Many of the Americans in the second category are expected to resume looking for work when the outlook improves, in many cases transitioning from being out of the labor force entirely to joining the ranks of the long-term unemployed.

Most economists, though, view the unemployment rate as useful for understanding the state of the job market and the economy. Federal Reserve Chairman Ben Bernanke called it "probably the best single indicator that we have" in December. The Fed's projections for 2014 show the rate dipping to as low as 6.2 percent by the end of the year.

And the U-6 unemployment rate also calculated from the BLS' household survey, a broader measure of underemployment that captures workers who have been forced into part-time work or who are only marginally attached to the labor force, stayed the same in December, at 13.1 percent. Over the course of 2013, that rate fell by 1.3 percentage points.