WASHINGTON (Reuters) - U.S. employment growth jumped in June and the unemployment rate declined to near a six-year low of 6.1 percent, effectively dispelling fears about the economy's health and underscoring its momentum heading into the second half of 2014.

Nonfarm payrolls increased by 288,000 jobs, the Labor Department said on Thursday. Data for April and May were revised to show a total of 29,000 more jobs created than previously reported.

Economists polled by Reuters had forecast a gain of 212,000 jobs in June. It was the first time since the technology boom in the late 1990s that employment has grown above a 200,000-jobs pace for five straight months.

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The closely watched employment report added to robust auto sales in June and data showing a steady manufacturing expansion in suggesting a plunge in economic output in the first quarter was a weather-driven anomaly.

Gross domestic product contracted at a 2.9 percent annual rate in the January-March period, causing a sharp downgrading of growth estimates for this year. Growth in the second half of the year is forecast around a 3.5 percent pace.

The sturdy pace of job gains was flagged by reports on Wednesday showing companies hired the most workers in 1-1/2 years in June, with small business hiring increasing for a ninth straight month.

With new applications for jobless aid holding at lower levels and the share of businesses that cannot fill open positions rising, there is little doubt the labor market is tightening.

The 0.2 percentage point drop in the unemployment rate in June to its lowest level since September 2008 came even as the labor force swelled. The unemployment rate has declined from a peak of 10 percent in October 2009, driven by job gains and a shrinking labor force.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was steady at 62.8 percent.

The improving tone of the labor market will be welcomed by the Federal Reserve and could spur debate on the timing of the first interest rate increase by the U.S. central bank.

Fed Chair Janet Yellen has argued that there is still considerable slack in the labor force, citing the low labor force participation, which she says partly reflects the departure of discouraged job seekers who could be enticed back into the workforce if conditions were to tighten

Most economists do not expect the U.S. central bank to raise rates until the middle of next year at the earliest, but with the labor market tightening that could change.

The Fed has kept benchmark overnight lending rates near zero since December 2008.

Job gains in June were across all sectors.

Manufacturing payrolls increased by 16,000, rising for the 11th straight month. Construction jobs advanced for the sixth consecutive month of gains.

Services industries employment jumped by 236,000, the biggest increase since October 2012, while government employment increased 26,000. The length of the workweek was steady at 34.5 hours. Average hourly earnings rose by six cents.