The US economy created 117,000 jobs in July, a better-than-expected outcome, according to the US Labor Department.
The figure was better than June's, which was itself revised up from 18,000 to 46,000.
The overall unemployment rate in July fell to 9.1% from 9.2%.
The news helped the Dow Jones share index to close higher. It comes after the index suffered its biggest one-day drop since 2008 on Thursday due to worries about the global economy.
The number of unemployed people fell to 13.9 million, down from 14.1 million.
President Barack Obama highlighted the number of private sector jobs added not just last month but for the past year-and-a-half, but conceded that "we've got to do better".
"We are going to get through this. Things will get better and we're going to get there together," he said.
Analysts welcomed the improved jobs figures, which came after recent data on economic growth and consumer spending had raised questions about the strength of the US recovery.
"It's pretty good, it provides some temporary relief; people had been fearing the worse but it's a better number than expected," said James Knightley, senior US economist at ING.
Businesses added 154,000 jobs, but the government cut 37,000 jobs according to the non-farm payroll figures.
However, 23,000 of those losses were linked to a temporary shutdown of Minnesota's state government which meant workers did not get paid that month.
Jobs were created in manufacturing, retail, health care, hotels and restaurants.
Average hourly earnings also increased by 0.4%, though weekly earnings remained unchanged.
However, the jobs figures may provide only a limited reassurance to investors worried about the US economy.
The figures benefited from a decline in the number of workers looking for a job which reduced the number of people registered as unemployed.
That suggests that rather than finding work some job seekers are instead giving up seeking employment.
Stock markets in the US opened higher, but fell back during the morning.
"There were fears we were going into recession and this allays those fears, but the labour market is still sick, and it reminds us of the enormously steep hill we have to climb," said Josh Feinman, chief global economist with DB Advisors.
US traders are also concerned about the continuing sovereign debt issues in the eurozone which threaten to undermine European economic growth.
"I think the sovereign debt issues in Europe are very much still weighing on people. People don't know what the end game is going to be there - I certainly don't," added Mr Feinman.