"We are on the brink of a recession now," Daniel North, chief economist for credit insurance company Euler Hermes ACI, told Reuters news agency.
"The job market is always a lagging indicator. This is a nail in [the] coffin."
In reaction to the report George Bush, the US president, said on Friday that there were "serious signs" that the US economy is weakening.
Bush also urged the US senate to pass a much vaunted $150bn economic stimulus package which has already been approved by the house of representatives.
Stocks fluctuate
The department revised December's total for new jobs up to 82,000 from 18,000, however it slashed its estimates for hiring in both October and November, highlighting how numbers were falling towards the end of 2007.
However, the US unemployment rate fell slightly from five per cent to 4.9 percent, the department said.
The US senate joint economic committee is expected to meet on Friday to discuss the department's findings.
Stock markets fluctuated following the announcement, wiping out early gains made following Microsoft's announcement that it had offered to buy Yahoo.
The news also comes as US oil giant Exxon Mobil reported the largest ever annual profit by a US company of $40.6bn.
Earlier this week the US Federal Reserve cut interest rates for a second time in less than two weeks following market volatility and fears of a US economic downturn.