Canada's unemployment rate fell to 7.2% in July, its lowest since December 2008, from 7.4% in June, though this was due more to people dropping out of the labour market than to job creation.
Statistics Canada said on Friday the economy managed to eke out 7,100 new jobs while holding on to the 28,400 jobs that were picked up in June.
The increase was less than half that expected in a Reuters survey of analysts but was marked by a healthy switch to full-time and private-sector employment.
The median forecast in a Reuters survey of analysts was for 15,000 new jobs and a 7.4% unemployment rate. July saw 25,500 new full-time positions while 18,400 part-time ones were lost.
Key to the unemployment rate decline was that 28,600 people dropped out of the labour force.
The jobless rate had peaked at 8.7% in August 2009 and now stands approximately two percentage points lower than that in the United States.
Despite the strong Canadian dollar, employment in manufacturing edged up by 10,100 and stood 22,000 higher than the depressed levels of a year earlier. Construction, transportation, warehousing and retail and wholesale all posted gains in the month; health and education registered losses.
The annual increase in hourly average wages of permanent employees, closely watched by the Bank of Canada for signs of inflationary pressure, fell to 1.2% in July from 2.0% in June.
The numbers, which provide the first glimpse into Canada's third quarter, are closely watched by the central bank. The Bank of Canada hiked interest rates three times last year, but paused in September due to global economic uncertainty.
The central bank was widely expected to resume its rate hike campaign this year. But the financial market turmoil of recent days has clouded the outlook.
Overnight index swaps, which trade based on expectations for the bank's key policy rate, show traders are now pricing in the prospect of rate cuts later this year.
Analysts said the near-term movement in markets may have a bigger influence on what the Bank of Canada does next than the most recent jobs data.
