"It indicates that investors are viewing this as a positive and playing into the hands of the Fed... The economy is growing and the Fed needs to get ahead of the yield curve. That's a positive," said Peter Cardillo, chief market economist at Rockwell Global Capital.
Dow futures initially declined about 60 points after the mostly in-line jobs report, down from an earlier level of about 30 points lower.
The report said that 215,000 jobs were added in July, with an unemployment rate of 5.3 percent. Average hourly earnings rose 0.2 percent, as expected.
"At this point I think we have to assume a September rate rise is still in the picture. This is exactly what we want to continue to see," said Brad McMillan, chief investment officer at Commonwealth Financial. "I think part of what the market is coming to terms with is a rate increase is more likely than not at this point."
Economists polled by Reuters expected an increase of 223,000 nonfarm payrolls in July, enough to allow the U.S. Federal Reserve to pull the trigger on its first rate hike in nine years.
"You get one more jobs report before (the Fed) meetings but September is solidly on the table," said Art Hogan, chief market strategist at Wunderlich Securities.
"I would argue September's been priced in for some time," he said.
The dollar turned higher, with the euro lower near $1.088.
"What the (report) really does is put focus on next month's jobs report," said Kate Warne, investment strategist at Edward Jones. "While they said they need 'some' (growth) they would like to see more."
The Federal Reserve said in its July statement it would need to see "some further improvement in the labor market" in order to raise rates.