The jobless rate fell 0.3 point to 7 percent in November -- its lowest level since November 2008 -- and the economy added 203,000 jobs, the Labor Department said.
Traders apparently set aside fears the news would prompt the Federal Reserve to end its quantitative easing program, which involves buying $85 billion a month in bonds to support the economy and keep interest rates low.
The Dow Jones industrial average closed up 198.69 points or 1.26 percent to 16,020.20, the Standard & Poor's 500 added 20.06 points or 1.12 percent to 1,805.09 and the tech-heavy Nasdaq gained 29.36 points or 0.73 percent to 4,062.52.
On the New York Stock Exchange, 2,228 issues advanced while 867 declined on volume of nearly 3.14 billion shares.
On foreign markets Japan's Nikkei 225 gained 122.37 points or 0.81 percent to 15,299.86 while Hong Kong's Hang Seng added 30.53 points or 0.13 percent to 23,743.10. In Europe, London's FTSE 100 added 53.66 points or 0.83 percent to 6,551.99, the French CAC 40 gained 29.46 points or 0.72 percent to 4,129.37 and the German DAX closed up 87.46 points or 0.96 percent to 9,172.41.
The 10-year treasury note gained 5/32. After jumping to a yield of more than 2.9 percent shortly after the jobless figures were announced rates settled back to 2.859 percent.
The dollar rose to 102.89 yen while falling against the euro, which traded at $1.3705.
Gold was off $3.90 on the Comex division of the New York Mercantile Exchange, at $1,228.10 per troy ounce. Silver lost 8 cents to $19.49.
In after hours NYMEX trading, crude oil added 40 cents to $97.78 per barrel.
On the Chicago Board of Trade, March corn was unchanged at $4.33 1/2, January soybeans lost 2 1/4 cents to $13.25 3/4 and March wheat lost 1 1/2 cents to $6.50 3/4.