US employment rose more than expected in April and hiring was much stronger than previously thought in the prior two months.
Today's figures eased concerns that belt-tightening in Washington was dealing a big blow to the economy.
The data sent US stocks sharply higher with the S&P 500 and Dow Joness hitting intraday record highs.
The S&P 500 index broke above 1,600 and the Dow traded above 15,000 for the first time as stocks extended this year's rally. The Dow later slipped back below 15,000 but managed to hang on to gains of over 1%.
US non-farm payrolls rose 165,000 last month and the jobless rate fell to 7.5%, the lowest level since December 2008, the Labor Department said today.
Payrolls rose by 138,000 jobs in March, 50,000 more than previously reported, and job growth for February was revised up by 64,000 to 332,000, the largest gain since May 2010.
Economists had expected April payrolls to rise 145,000 and the unemployment rate to hold steady at 7.6%.
The drop in the jobless rate reflected a gain in employment, rather than people leaving the workforce. The workforce actually expanded, while the labour force participation rate - the share of working-age Americans who either have a job or are looking for one - held steady at a 34-year low of 63.3%.
Still, some details of the report remained consistent with a slowdown in economic activity. Construction employment fell for the first time since May, while manufacturing payrolls were flat.
The average workweek pulled off a nine-month high, with a gauge of the overall work effort falling, but average hourly earnings rose four cents.
The relative strength of the data was particularly surprising given other recent signs that suggested the economy had slowed sharply in recent weeks. Although the economy expanded at a 2.5% annual pace in the first quarter, a wide range of data suggested it ended the period with less speed. Further, factory activity barely grew in April.
Economists feared uncertainty over the full impact of higher taxes and deep government spending cuts on already sluggish demand was making businesses reluctant to hire. A 2% payroll tax cut ended at the start of the year, and $85 billion in federal budget cuts went into effect on March 1.
While the pace of hiring was stronger than expected in April, it remained below the pace needed to put a significant dent in the jobless rate.
Economists said the data did not appear strong enough to dissuade officials at the Federal Reserve from pressing forward with their bond-buying stimulus, although it could cool speculation that the Fed would step up its purchases.
The Fed said earlier this week that it would continue to buy $85 billion in bonds each month and that it would increase purchases should the need arise. All the job gains last month were in the private sector, which added 176,000 new positions.
Gains were led by a rebound in retail employment, which had dropped in March after eight months of increases in a row. Retail payrolls rose 29,300.
But construction employment surprisingly fell, shedding 6,000 jobs after 10 consecutive months of gains. Residential construction has been marching higher and the pullback in construction jobs could be the result of cold weather in April.
Manufacturing employment posted no gains last month. Government payrolls dropped 11,000 after falling 16,000 in March. Most of the job declines last month came from the federal government and the US Postal Service.
Warren Buffett says economy still improving slowly
Investor Warren Buffett believes that the economy and the US job market will continue to improve, but slowly.
In interviews that aired today, Buffett said business has been creeping upward at his Berkshire Hathaway conglomerate.
"The economy is improving, not at a rapid clip, but this country has done well since 2008 - certainly compared to the rest of the world," Buffett said to CNBC.
Buffett thinks it would be extraordinary if the US Federal Reserve were to expand its bond-buying programme beyond the current $85 billion a month level.
The Fed said on Wednesday that it would consider buying more if the economy needs help.
Fed Chairman Ben Bernanke needs some help from elsewhere to get the economy moving faster, Buffett said. Bernanke has urged Congress to do more to stimulate hiring and growth.
In a separate interview with the Fox Business Network today, Buffett tried to reassure Berkshire shareholders that they should not worry about his successor.
The 82-year-old billionaire said he is not concerned about who will next lead four companies in which Berkshire invests nearly $50 billion, such as Coca-Cola, IBM, Wells Fargo and American Express.
''I don't know who's going to succeed the present CEOs there and in every case, each one of the four they have changed CEOs since we started buying the stock in certain cases more than once," Buffett said. "I never knew who they were going to be. I knew they'd pick good people."
Buffett said Berkshire's board spends more time discussion succession planning than any other topic.
But Buffett has no plans to retire. He has said Berkshire's board has picked someone to succeed him as CEO if the need arises immediately, and it has two backup candidates. But Buffett will not publicly identify his successor, partly because he has said the candidates could change over time.
Currently, all of the CEO candidates on Berkshire's short list are men, but Buffett said that could change.
"Maybe 10 years or 15 years from now it will be a she. I hope it is," he said.
Berkshire plans to split Buffett's job into three parts when he no longer leads the company. The next CEO will run Berkshire, but two others hired by Buffett in recent years will oversee investment. Buffett wants his oldest son to succeed him as chairman.
Berkshire owns more than 80 subsidiaries, including railroad, clothing, furniture and jewellery firms. Its insurance and utility businesses typically account for more than half of the company's net income. The Omaha, Nebraska, company also has major investments.