But critics on Thursday said US officials manipulated the figures in order to paint a rosier picture on the ground.
Increased employment in Iraq is seen as a measure of progress as the country moves towards January elections.
State department figures released on 22 September indicate the US government overstated by more than 30,000 the number of Iraqis working on projects funded by the US Agency for International Development (USAID), one of Washington's biggest employers in Iraq.
The Iraq Weekly Status report said 45,844 Iraqis were employed in projects funded by USAID, according to 15 September data, compared with 88,436 recorded in the previous week's report, amounting to a 48.2% decrease.
The 88,436 figure was later adjusted to 55,463 jobs.
A recent study carried out by economists at Baghdad University indicates the unemployment rate in Iraq sits at about 70%.
"This decrease in employment numbers reflects correction of a previous accounting error," said a small-type footnote at the bottom of the unclassified 22 September document.
"The overstating probably fits with the tendency of meeting the master's desire for happy news"
Rick Barton, Centre for Strategic and International Studies
Asked to explain the error, USAID spokesman Jose Fuentes said he was looking into it.
Democrats accuse the Bush administration of offering an overly optimistic view of Iraq, with the party's presidential candidate Senator John Kerry accusing President George Bush of living in a "fantasy world of spin".
Reconstruction expert Rick Barton of the Centre for Strategic and International Studies, a Washington thinktank, said overstating such numbers was in line with the administration's tendency to stress the positive and downplay negative news.
"The overstating probably fits with the tendency of meeting the master's desire for happy news," Barton said.
High unemployment rate
But Barton said the real story was not whether figures had been inflated, but why so few new jobs had been created in a country where unemployment might be as high as 50% and was seen as contributing to the anti-US, anti-interim government movement.
A little more than $1.2 billion has been spent out of the $18.4 billion the US congress rushed through last year to rebuild Iraq.
Much of Iraq's infrastructure has
yet to be rebuilt
The total number of Iraqis estimated to be working on US-funded projects was 74,770 in the latest US state department weekly report released on Thursday, a decrease of 2.5% over the previous week's total of 76,699.
More than half of these jobs are for USAID projects.
One US government official, who asked not be named, said there had been some confusion over how to calculate the number of jobs given to Iraqis and whether work that lasted for a day or even a few hours should be included.
"Basically, most people think we should count employment that would generate income for a family and something which is sustainable, rather than just a short-term job," the official said.
A spokeswoman for the Iraq Project and Contracting Office, which handles US-funded contracts, said there was an "ebb and flow" in the number of jobs for Iraqis, depending on security and the number of projects in any given week.
The US state department hopes that by the end of 2005, US funding will create an additional 800,000 jobs in Iraq.