Job growth proved better than expected in June, boosted by government hiring, as the labor market showed surprising resilience and likely took a July interest rate cut off the table.

Nonfarm payrolls increased a seasonally adjusted 147,000 for the month, higher than the estimate for 110,000 and just above the upwardly revised 144,000 in May, the Bureau of Labor Statistics reported Thursday. April’s tally also saw a small upward revision, now at 158,000 following an 11,000 increase.

The unemployment rate fell to 4.1%, the lowest since February and against a forecast for a slight increase to 4.3%. A more encompassing rate that includes discouraged workers and those holding part-time positions for economic reasons edged down to 7.7%, the lowest since January.

Though the jobless rates fell, it was due largely to a decrease in those working or looking for jobs.

The labor force participation rate dropped to 62.3%, its lowest level since late 2022, owing to an increase of 329,000 of those not counted in the labor force. The household survey, which is used to calculate the unemployment rate, showed a smaller employment gain of just 93,000. The ranks of those who had not looked for a job in the past four weeks swelled by 234,000 to 1.8 million.

Stocks rose following the report while Treasury yields increased sharply in a trading session that will end early ahead of the Independence Day holiday Friday in the U.S.

The July gain was almost exactly in line with the year-to-date average of 146,000.

“The solid June jobs report confirms that the labor market remains resolute and slams the door shut on a July rate cut,” said Jeff Schulze, head of economic and market strategy at ClearBridge Investments. “Today’s good news should be treated as such by the markets, with equities rising despite the accompanying pickup in interest rates.”

Along with the solid payroll gains and fall in the unemployment rate, average hourly earnings increased 0.2% for the month and 3.7% from a year ago, indicating little upward pressure on wage-related inflation. The average work week moved slightly lower to 34.2 hours.

Government employment posted a large gain, leading all categories with an increase of 73,000 due to solid boosts in state and local hiring, particularly in education-related jobs, which rose by 40,000. Federal government, which is still feeling the impact of cuts from Elon Musk’s so-called Department of Government Efficiency, lost 7,000.

In addition, health care again was strong, adding roughly 39,000, while social assistance contributed about 19,000.

Construction saw an increase of 15,000, and manufacturing lost 7,000. Most other sectors showed little change.

“The US job market continues to largely stand tall and sturdy, even as headwinds mount — but it may be a tent increasingly held up by fewer poles,” wrote Cory Stahle, economist at Indeed Hiring Lab. “The headline job gains and surprising dip in unemployment are undoubtedly good news, but for job seekers outside of healthcare & social assistance, local government, and public education, the gains will likely ring hollow.”

The payrolls report comes with an intensified focus on where the Fed heads with monetary policy as signs increasingly appear of a slowing labor market while President Donald Trump’s tariffs thus far have produced a muted impact on inflation.

In related news, the Labor Department also reported Thursday that initial unemployment claims for the week ending June 28 fell to 233,000, a decline of 4,000 and below the estimate for 240,000.

Trump has demanded the Fed lower its benchmark interest rate, which it has kept steady in a range between 4.25% and 4.5% since December. Along with that, the president on Wednesday upped the stakes, saying in a Truth Social post that Fed Chair Jerome Powell “should resign immediately.”

For his part, Powell has kept a cautious tone on policy. In an appearance Tuesday, the central bank leader said that while every meeting is on the table for a rate cut, the strength of the U.S. economy is affording time to evaluate the incoming data.

Market pricing shifted strongly following the payrolls report, with traders all but taking the chance of a July rate cut off the table. Odds for a July move fell to 4.7%, down from 23.8% on Wednesday, according to the CME Group’s FedWatch. The market continues to see the next reduction not coming until September and also reversed expectations for three total cuts this year, with the likelihood now reduced to two.

There had been some speculation ahead of the report that a weak number was possible, with private payrolls service ADP on Wednesday reporting a loss of 33,000. However, the BLS report showed a gain of 74,000 in that category.

Those getting jobs tilted strongly to full-time positions, which increased by 437,000. Part-time workers fell by 367,000.