The Canadian economy created 27,100 jobs during August, surprising economists who were expecting losses.

Economists had forecast a net drop of about 20,000 jobs.

The unemployment rate edged up 0.1 percentage points to 8.7% as more people participated in the labour market, Statistics Canada said Friday.

Employment in the private sector rose 49,000, the first increase in this group since last September.

While economists were encouraged by the growth in employment, they noted that the news was not entirely positive.

“Looking beneath the surprisingly snappy headline, the details were a bit less impressive,” said BMO Capital Markets economist Douglas Porter, noting that the gains in employment were made up of part-time positions.

Specifically, the economy added 30,600 part time jobs, while experiencing a continued deterioration of full-time work. With an additional 3,500 full-time job losses in August, the total since last October is now 486,000 jobs.

StatsCan noted that while Canada has lost 387,000 jobs since last October, only 31,000 of those have come in the last five months.

The better labour conditions were noticeable across a number of industries, including construction, financial services, retail and wholesale trade, as well as real estate and leasing.

Losses came in business, building and other support services, education services and the battered manufacturing sector, which shed another 17,300 workers.

Students continued to experience the worst of summer job markets with the average jobless rate hitting 19.2%, the second highest since 1977.

Regionally, Saskatchewan was the only province to experience a sizable deterioration in the job market, losing 3,200 jobs. But the province still boasts Canada’s lowest unemployment rate at 5%.

Friday’s employment report reinforces indications that an economic recovery is underway, following news earlier this week that GDP grew in the month of June.

“The unexpected rise in employment sows the seeds for activity to continue to pick up,” said Dawn Desjardins, assistant chief economist at RBC Economics Research.

Economists at TD Economics agree that the data supports views that Canada’s economy has turned the corner, but warn that the unemployment rate is likely to continue its upward trend.

“Looking ahead, the unemployment rate will certainly rise as workers are re-attracted to the labour force, and employment will likely remain choppy on a monthly basis as a tepid recovery takes hold,” said economist Grant Bishop.

U.S. unemployment rate climbs

South of the border, job losses softened in August but the unemployment rate soared to its highest level since June 1983. Nonfarm payrolls declined 216,000 last month, the U.S. Labour Department said, smaller than the job losses economists expected. Revised data showed more job losses than previously reported in earlier months.

The unemployment rate grew to 9.7%, the highest level since June 1983 when the rate was 10.1%. In July, the unemployment rate had declined for the first time since April 2008.

Economists were encouraged by the slower pace in job losses in the month of August, but warned that the labour market remains very weak, which could hamper an economic recovery.

“The job losses are slowing in typical lagged fashion as the economy emerges from recession,” said BMO Capital Markets economist Sal Guatieri. “But they remain large, and joblessness continues to mount, which can only make it harder for households to repay debt and rebuild savings, thereby impeding a consumer-led recovery.”

IE