It was an encouraging sign for an economy that's been struggling to create enough jobs. So was the fact that more people decided to look for work in September.
A separate government survey of companies and government agencies showed they added 114,000 jobs in September. And it turns out that 86,000 more jobs were added in July and August than the government had initially estimated.
"An overall better-than-expected jobs report, consistent with most recent data that suggest the economy is gaining some momentum," said Sal Guatieri, an economist at BMO Capital Markets. "The sizable drop in the unemployment rate could lift the president's re-election chances."
Stock prices rose on the news. The Dow Jones industrial average gained 60 points in the first hour of trading before trimming some of its gains later. Broader stock indexes also rose.
The 7.8 percent unemployment rate for September matches the rate in January 2009, when Obama took office. In the months after his inauguration, the rate rose sharply and had topped 8 percent for 43 straight months.
The decline in unemployment comes at a critical moment for Obama, who is coming off a weak debate performance this week against GOP challenger Mitt Romney.
"Politically, it is clear good news for the president," said Robert Shapiro, who served in President Bill Clinton's Commerce Department. "It shows that the (economy's) momentum has not been broken. He has brought unemployment below 8 percent."
Republican strategist Jim Dyke countered that "there's a danger in celebrating what is still a high level of unemployment." Romney will continue "to point out that this is not what a real recovery looks like," Dyke said.
The number of unemployed Americans is now 12.1 million, the fewest since January 2009.
The government's survey of employers shows they added an average 146,000 jobs a month from July through September, up from an average 67,000 jobs in the April-June quarter.
It also shows that federal, state and local governments added 10,000 jobs in September and a revised 63,000 jobs combined in July and August. The government's initial estimates had shown government job losses for July and August.
The September employment report may be the last that might sway the remaining undecided voters. The jobs report for October will be released only four days before Election Day.
Speaking Friday in Fairfax, Va., Obama celebrated the drop in the unemployment rate.
"We are moving forward again," the president said.
Romney released a statement pointing out that the number of jobs on employers' payrolls in September was lower than the revised 142,000 for August. He also noted that manufacturing has lost 600,000 jobs since Obama took office.
"This is not what a real recovery looks like," Romney said in a statement.
But Sal Guatieri, an economist at BMO Capital Markets, said the report signals improvement.
"An overall better-than-expected jobs report, consistent with most recent data that suggest the economy is gaining some momentum," Guatieri said in a note to clients. "The sizeable drop in the unemployment rate could lift the president's re-election chances following a post-debate dip."
Labor Secretary Hilda Solis was asked on CNBC about suspicions that the Obama administration might have skewed the jobs numbers to aid Obama's re-election prospects.
"I'm insulted when I hear that because we have a very professional civil service," Solis said. "I have the highest regard for our professionals that do the calculations at the (Bureau of Labor Statistics). They are trained economists."
The job market has been improving, sluggishly but steadily. Jobs have been added for 24 straight months. There are now 325,000 more than when Obama took office.
Still, many of the jobs the economy added last month were part time. The number of people with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million, the most since February 2009.
But overall, Friday's report dispelled some fears about the job market. Average wages rose. And more people started looking for work.
The jump in the number of employed Americans that the government reported comes from a survey of 60,000 households that determines the unemployment rate. The government asks a series of questions, by phone or in person. They include:
Do you own a business? Did you work for pay? If not, did you provide unpaid work for a family business or farm? (Those who did are considered employed.)
Afterward, the survey participants are asked whether they had a job and, if so, whether it was full or part time. The government's definition of unemployed is someone who's out of work and has actively looked for a job in the past four weeks.
The government's separate survey of employers goes to roughly 140,000 businesses to determine the number of jobs businesses created or lost.
The September job gains were led by the health care industry, which added 44,000 jobs — the most since February. Transportation and warehousing also showed large gains.
The "U.S. could be growing jobs at a marginally faster pace than feared mid-summer," Guy LeBas, a strategist at Janney Capital Markets, wrote in a research note. "Even with the issues in Europe and slowing production in China, U.S. economic activity does not look to be bearing the brunt of global downside, at least not anymore."