Employers added a smaller-than-expected 121,000 new workers to their payrolls last month, but the jobless rate stayed at a five-year low of 4.6 percent and average hourly earnings rose, the Labor Department said on Friday.

The report was a modest improvement over May, when employers added an upwardly revised 92,000 jobs and lead the market to pare down expectations of continued interest-rate increases from the Federal Reserve.

Still, June's wage gains may figure in the inflation-wary central bank's thinking. Average hourly earnings rose 8 cents, or 0.5 percent, while the average hourly work week climbed back to match a 3- year high struck in April.

The 3.9 percent year-over-year gain in average hourly earnings was the largest in five years, the Labor Department said.

The unexpectedly small jobs gain could have an impact on financial markets, where many were betting on a big jump in payrolls.

Economists raised their expectations of job growth on Wednesday and the median estimate in a Reuters poll rose to 185,000 jobs, up from an earlier forecast of 155,000, after a relatively new private indicator called the ADP National Employment Report said private-sector employers created an estimated 368,000 new jobs in June.

The Fed last week raised interest rates a 17th straight time by a quarter-percentage point to 5.25 percent.

The U.S. economy has slowed since the first quarter and higher gas prices, rising interest rates, and a slowdown in house price appreciation are expected to make Americans more cautious about spending.