Employers expanded their payrolls by 207,000 in July, the most in five months, while unemployment rate held steady at 5 percent.
The latest snapshot from the Labor Department offered strong evidence that the job climate is improving considerably.
Boosts in hiring came in retailing, education and health services, financial activities and construction. But factories shed jobs for the second straight month.
The department said Hurricane Dennis, which ripped through Florida, Alabama and Mississippi last month, had "no discernible" effect on job growth in July.
Revised figures released Friday for May and June showed that payroll gains in those months proved stronger than previously thought. The number of jobs increased by 126,000 in May and 166,000 in June.
Analysts had predicted a gain of 180,000 positions in July and forecast that jobless rate to hold steady. The employment increase in July was the most since the addition of 300,000 jobs in February.
The Federal Reserve, which next meets on Tuesday, is expected to raise short-term interest rates by one-quarter of a percentage point. It would be the 10th such increase since the central bank began to tighten credit on June 2004 to keep inflation in check.
With the labor market improving, the Fed is keeping close watch for signs of inflation, especially any from the compensation front.
Workers' average hourly earnings rose to $16.13 in July. That was 0.4 percent more than the average in June of $16.07. The increase was the most in a year.
The July report also showed that the average time that the unemployed spent searching for work was 17.6 weeks, compared with 17.1 in June.
Economists predict the Fed will continue to raise rates this year to prevent inflation from breaking out.
The labor market is the one part of the economy that has had difficulty getting back to full health after the 2001 recession.
President Bush wants to see both jobs and the economy on solid footing as he tries to sell his plan for overhauling the Depression-era Social Security retirement system.
Friday's report offered hope that the labor market recovery might stay in a higher gear and suggested that surging energy prices were not crimping employment.
Oil prices hit a closing hit of $61.28 a barrel in early July. On Wednesday prices briefly reached $62.50 a barrel before retreating. Gasoline prices are staying well above $2 a gallon.