The US labor market added far more jobs than projected in September while the unemployment rate unexpectedly ticked lower, reflecting a stronger picture of the jobs market than Wall Street had expected.

Data from the Bureau of Labor Statistics released Friday showed the labor market added 254,000 payrolls in September, more additions than the 150,000 expected by economists.

Meanwhile, the unemployment rate fell to 4.1%, from 4.2% in August. September job additions came in higher than the revised 159,000 added in August. Revisions to both the July and August report showed the US economy added 72,000 more jobs during those two months than previously reported.

Wage growth, an important measure for gauging inflation pressures, rose to 4% year over year, from a 3.9% annual gain in August. On a monthly basis, wages increased 0.4%, in line with August's reading.

The key question entering Friday's report was whether the data would reflect significant cooling in the labor market, which could prompt another large Fed interest rate cut. Robert Sockin, Citi senior global economist, told Yahoo Finance that the better-than-expected jobs report makes it less likely the Fed moves with the "urgency" it did at its September meeting when the central bank cut interest rates by half a percentage point.

"This pushes the Fed out a lot," he said, adding that it's uncertain the Fed will make a 50 basis point cut again this year.

Read more: Jobs, inflation, and the Fed: How they're all related

Following the report, markets were pricing in a roughly 5% chance the Fed cuts interest rates by half a percentage point in November, down from a 53% chance seen a week ago, per the CME FedWatch Tool.

"Looking at the labour market strength evident in September’s employment report, the real debate at the Fed should be about whether to loosen monetary policy at all," Capital Economics chief North America economist Paul Ashworth wrote in a note to clients on Friday. "Any hopes of a [50 basis point] cut are long gone."

Futures tied to major US stock indexes rallied on the news. S&P 500 futures (ES=F) put on nearly 0.8%, while Dow Jones Industrial Average futures (YM=F) added roughly 0.5%. Contracts on the tech-heavy Nasdaq 100 (NQ=F) moved 1.1% higher.

Renaissance Macro head of economics Neil Dutta wrote in a note following the release that September's jobs report was "undeniably good news" for the equity market.

"At the end of the day, the Fed is still cutting policy rates even as the economy grows," Dutta wrote.