Stocks were mixed, with the S&P 500 slightly higher and Nasdaq lower. Treasury yields were lower but they were higher earlier in the day. The 10-year was at 2.37 percent after rising to as high as 2.45 percent ahead of the jobs report.
Economists have mostly been forecasting the first rate hike for September, based on expectations the economy will continue to improve through the summer.
"I think it doesn't really change the current take on the Fed. It's still a September or December liftoff hike," said Ian Lyngen, senior Treasury strategist at CRT Capital. "I think it was a reasonable report. If you factor in prior revisions, on the margin, it was slightly softer than anticipated. But it was not a significant enough deviation from expectations to warrant a shift in forecast."
But traders in futures markets Thursday cut back wagers on the first Fed rate increase for both September and December, and pushed bets out into 2016.
For instance, CME FedWatch, which tracks expectations in fed funds futures, shows that traders now see just a 49 percent chance of a December rate increase, down from 57 percent, according to Reuters.
RBS, which tracks a different measure, puts the odds of a September hike at just 23 percent, from a prior 30 percent.
"This was I would say a setback," said Jan Hatzius, chief economist at Goldman Sachs. The firm expects the first rise in December.
"It does not really change that significantly. It was a mixed report. Some aspects were more conducive to a rate hike," Hatzius said. He pointed to the drop in the unemployment rate, viewed as a trigger for the Fed as it edges closer to 5 percent, but noted the reasons for the decline were not positive.
Another disappointing detail in the report was that average hourly wages rose by just 2 percent in June over a year ago, down from 2.3 percent in May. There was also a downward revision that removed 60,000 jobs from April and May reports.
Economists say a necessary ingredient for a Fed rate hike is signs that wages will continue to rise, signalling eventual inflation.