All the gains in non-farm employment in July came from the private sector, where payrolls rose 154,000 -- an acceleration from June's 80,000 increase and more than the 115,000 expected by economists.
Government payrolls dropped 37,000 in July, a ninth straight month of job losses. The drop was mostly due to a government shutdown in Minnesota that left thousands of state workers without pay checks during the survey period for July payrolls.
With looming budget cuts at the federal government level and state and local governments still tightening their belts, the burden of job creation falls on the private sector.
Within the private sector, most of the job gains were concentrated in the services sector. Temporary help -- a harbinger of permanent hiring - rebounded modestly after declining for three straight months.
Manufacturing payrolls rose 24,000 after increasing 11,000 in June. Most the gains came from the auto sector. Construction employment increased 8,000 after dropping 5,000 in June.
The jobless rate declined as 193,000 people left the labor force and the number of unemployed dropped by 156,000. The share of the eligible population holding a job declined to 58.1 percent, the lowest since July 1983.