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.

U.S. President Barack Obama welcomed the job gains, but said the country must do better. Mr. Obama said the economy will improve, and pledged to press Congress for legislation to quickly create jobs when lawmakers return to Washington next month.