The overall unemployment rate in July fell to 9.1% from 9.2%.
The news helped the Dow Jones share index to open 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.
"It's pretty good, it provides some temporary relief, people had been fearing the worse but it's a better number and it has helped to stabilise market sentiment," 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.
Average hourly earnings also increased by 0.4%, though weekly earnings remained unchanged.
The unemployment figures benefited from a decline in the number of workers looking for work which reduced the number of people registered as unemployed.
"We really dodged a bullet here, this is something that the market really needed," said Rudy Narvas, senior economist at Societe Generale.
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