The US unemployment rate fell to 7.8% last month, dropping below 8% for the first time in nearly four years and giving a boost to President Barack Obama's re-election campaign.
The jobless rate for September had been expected by many economists to inch up from 8.1%, which would have allowed Republican challenger Mitt Romney to cast Mr Obama as ineffective in job creation.
The Labor Department reported that the US economy actually only generated a lacklustre 114,000 jobs in September, but at 7.8% the unemployment level is at its lowest point since January 2009, when President Obama took office.
Employment gains for the two previous months of August and July were also revised higher by a combined 86,000.
The number of new jobs created in August was revised up to 142,000 from an original estimate of 96,000. July's figure was revised up to 181,000 from 141,000.
The unemployment rate had been fluctuating between 8.1% and 8.3% since January after being stuck at between 8.9% and 9.1% for 10 months in 2011.
No president has been re-elected with unemployment above 8% since the Great Depression. Only Ronald Reagan has won a second term since World War II with unemployment above 6%. The rate was at 7.2% on election day in 1984.
Both President Obama and Mitt Romney have put job creation at the centre of their campaign pledges.
Mr Obama last September proposed the American Jobs Act, which would cut payroll taxes for workers and employers and increase spending on public works.
Speaking at a rally in Virginia hours after the report, he told the audience that he believed that "as a nation we are moving forward again".
"Today's news certainly is not an excuse to talk down the economy to score a few political points... This country has come too far to turn back now," President Obama added.
Mr Romney, who has promised to create 12 million new jobs if elected, was quick to downplay the significance of the drop in the national unemployment rate.
"This is not what a real recovery looks like," he said in a statement. "We created fewer jobs in September than in August, and fewer jobs in August than in July, and we've lost over 600,000 manufacturing jobs since President Obama took office."
"If not for all the people who have simply dropped out of the labor force, the real unemployment rate would be closer to 11%," he added.
A Reuters/Ipsos poll released on Thursday after Wednesday's first presidential debate showed Romney gained ground and is now viewed positively by 51% of voters. Obama's favorability rating remained unchanged at 56%.