Canada’s unemployment dropped to 7% in December, Statistics Canada reported today. That’s the lowest level since May 2001, and better than the 7.2% rate forecast by economists.

The jobless rate last month was down 0.3 percentage points from 7.3% in November.

The economy added an estimated 34,000 jobs last month, bringing employment gains for 2004 to 228,000. Last year’s job growth of 1.4% was slightly lower than in 2003, when employment grew by 1.8%.

All of the employment gains in 2004 were in full-time jobs and the total number of hours worked rose by 2.2%, Statistics Canada said.

The manufacturing sector struggled for a second consecutive year, with employment especially hard hit in the second half of 2004.

“Manufacturers had a difficult year as they were confronted with a higher Canadian dollar as well as substantial increases in the price of crude oil and other raw material inputs,” StatsCan said.

Employment in the manufacturing sector is now about 4.3% below a recent peak in 2002. . While manufacturing employment was down, construction employment increased 6.3% last year, with commercial building and housing starts driven by low interest rates.