The Government hailed new figures showing a record number of people in work as a “real landmark”, as unemployment and jobless benefit claimants fell.
Employment grew in the quarter to August by 212,000 to 29.59 million, the highest since records began in 1971, although more people are in part-time jobs than ever.
The Prime Minister acknowledged there were still "enormous economic challenges" facing the country but he said reforms were being made which could safeguard the UK's place in the world.
Labour and unions said there was still a "stubborn underlying problem" of the long-term unemployed, while a business group said the UK economy had returned to positive growth in the third quarter of 2012.
Unemployment fell by 50,000 in the latest quarter to 2.53 million, the lowest since the spring, giving a jobless rate of 7.9%.
The numbers claiming jobseeker's allowance fell by 4,000 in September to 1.57 million, the third consecutive monthly fall and the lowest total since July 2011.
The Office for National Statistics also reported that part-time employment increased by 125,000 between March and May to a record high of 8.13 million.
The number of people in part-time jobs because they could not find full-time work was close to a record high at 1.4 million.
Youth unemployment fell by 62,000 to 957,000, the lowest figure for over a year.
Self-employment has also increased, up by 35,000 to 4.2 million, while the number of unpaid workers in a family business rose by 2,000 to 112,000.
David Cameron said at Prime Minister's Questions in the Commons that the Work Programme was helping to tackle the "still too high" level of long-term unemployment, adding: "We do have the measures in place to tackle this scourge.
"We have to rebalance our economy because the state sector was too big, the private sector was too small.
"What's happened since the election is one million new private sector jobs, which more than makes up for the inevitable loss of jobs in the state sector.
"We've got a huge amount more to do to reform welfare, reform our schools, boost our private sector and Britain can be a winner in the global race," he said.
Labour leader Ed Miliband said youth unemployment and long-term unemployment were higher than when the coalition came to power.
Long-term youth unemployment had been "steadily rising" for the last year or 18 months, he said.
Employment minister Mark Hoban said: "It's a real landmark to see more people in work than ever before. Despite the tough economic times, the private sector continues to create jobs and our welfare reforms are encouraging people to return to work."
Unite leader Len McCluskey said: "Hidden behind the statistics is the stubborn underlying problem of the long-term unemployed, whether it is the 16 to 24-year-olds or other groups seeking work. It is those areas that ministers need to concentrate on as a matter of urgency."
David Kern, chief economist at the British Chambers of Commerce, said: "The latest job market figures are encouraging and support our assessment that the UK economy has returned to positive growth in the third quarter of 2012.
"The level of employment is at a record high, and the fall in the level of inactivity is a positive development, signalling that people are returning to the workforce."
Gerwyn Davies of the Chartered Institute of Personnel and Development, said: "A quarterly rise of more than 150,000 employees offers the strongest evidence for some time that the jobs market might be gathering genuine momentum, with growth now being driven by firms rather than the self-employed."
Tracey Bleakley, chief executive of the Personal Finance Education Group, said: "Nearly a million young people are still struggling to find work, and the truth is that we are making the problem worse by allowing them to leave school without the skills they need to manage their finances in tough times."