The U.S. economy had a net gain of 117,000 jobs in July, and the unemployment rate declined slightly to hit 9.1 percent.

Friday's report from the Labor Department was better than economists had predicted.

The data also show the unemployment rate declined because some unemployed people gave up their job hunt in the belief that there is no work available for them. Washington does not count people as unemployed unless they are activly seeking jobs.

The job gains were in the private sector, with health care, retail and manufacturing adding tens of thousands of jobs. State and local governments, which have seen tax revenue fall sharply during the recession, continued laying off workers, pushing government payrolls down by 37,000.

Experts say the economy will have to gain far more jobs in order to cut the unemployment rate. It takes a gain of 125,000 jobs each month just to accompdate new entrants to the work force.

The slow job growth follows reports showing that the U.S. economy grew at a meager 1.3 percent annual rate in April, May, and June.