US employers added more than 500,000 jobs in July and the unemployment rate dropped, defying fears that the labour market is heading for a slowdown.
The jobless rate fell to 3.5% from 3.6% in June, as restaurants, bars and other firms continued to add workers.
The report from the Labor Department was far stronger than expected, after recent data showed the US economy continuing to shrink.
The US central bank is raising interest rates to rein in surging prices.
Higher borrowing costs reduce spending and economic activity. But top economic officials in the US have said they hope the US labour market will remain strong enough to allow the Federal Reserve to raise rates without triggering a recession.
Treasury Secretary Janet Yellen, who previously led the bank, said last week that the economy was shifting from its booming post-pandemic recovery to a more solid and steady phase of growth.
But fears of a sustained slowdown have mounted, as consumer confidence falls, the housing market slows and some firms announce job cuts or plans to slow hiring.