The June jobs report revealed higher than expected job growth, with 206,000 new jobs created. However, a third of those jobs were in the government sector. 

Government employment rose by 70,000, which is far higher than the average of 49,000 over the last year. 

Government employment was boosted by local government, excluding education and state government. The healthcare sector added 49,000 positions, lifted by increased hiring in ambulatory healthcare services and at hospitals.

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Construction payrolls increased by 27,000 jobs. But the retail sector shed jobs, as did manufacturing.

Professional and business services employment declined by 17,000 jobs, with temporary help jobs dropping by about 49,000. That likely portends to slower payrolls gains ahead. 

Economists say the economy needs to create at least 150,000 jobs per month to keep up with growth in the working-age population, accounting for the recent surge in immigration.

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In a good sign for the Federal Reserve and its battle against inflation, unemployment increased from 4% to 4.1%, and wage growth slowed to a rate not seen since 2021. 

Average hourly earnings rose 0.3% last month after advancing 0.4% in May. In the 12 months through June, wages increased 3.9%. That was the smallest gain in wages since June 2021 and followed a 4.1% rise in May. Wage growth in a 3%-3.5% range is seen as consistent with the Fed's 2% inflation target.

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Also notable was the downward revision from April and May. The April jobs report was revised downward from 165K to 108K, while the May jobs report was revised down from 272K to 218K. 

Reuters contributed to this report.