But economists said job creation is likely to slow this year on weaker economic growth, which would take the pressure off high labour costs and might help to cool inflation at 25-year highs.

Preliminary government data showed on Thursday that employment rose by 64,200 jobs in the three months to the end of December, the Manpower Ministry said, up from 58,600 in the third quarter. Unemployment was 1.7 percent in the third quarter.

"There was further tightening in the labour market, but with growth likely to moderate, and the government encouraging more Singaporeans to return to the workforce, the unemployment rate will be treading a little higher this year," said Irvin Seah, a DBS economist.

The unemployment rate averaged 2.1 percent last year, lower than the 2.7 percent in 2006, the government said. Seah said he expects the jobless rate to climb back up to 2.2 percent by the end of this year.

Most Asian economies are expected to slow this year on the back of weak economic growth in the United States, the region's top export market.

Singapore's export-driven economy unexpectedly shrank in the fourth quarter -- the first time since 2003 -- as manufacturing weakened, preliminary estimates from the government show.

The services sector created the most number of jobs in the fourth quarter, adding 39,500 positions. The construction sector added 13,200 jobs, and the manufacturing sector created 11,000 positions.

New jobs for the whole year rose to 236,600 last year, sharply higher than 176,000 jobs created in 2006, the government said.

The share of new jobs going to local Singaporeans dropped to 39 percent in 2007, from 52 percent the previous year, the data showed, reflecting the country's aggressive immigration policy that aims for a third increase in population.

The Singapore government expects economic growth in the city-state to slow to 4.5-6.5 percent this year from last year's estimated 7.5 percent.

Singapore reports unemployment on a quarterly basis.

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