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A construction worker at a site in Toronto.

Deborah Baic/Deborah Baic/The Globe and Mail

Canada's labour market bounced back in August with 26,000 new jobs, thanks to a surge in public sector hiring and new positions in Quebec. But, despite the gains, the country's jobs market continued to show signs of strain.

The rebound follows a month when the economy shouldered huge losses in full-time employment and the August rebound was not enough to offset the declines.

"The Canadian job market is simply stuck in a rut," Douglas Porter, chief economist with Bank of Montreal, said in a note.

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The unemployment rate rose to 7 per cent from 6.9 per cent in July, as more people searched for work, according to Statistics Canada's monthly labour force survey released on Friday.

In the 12 months to August, full-time work declined by 35,700 positions and part-time work increased by 113,100 spots.

Weak oil prices and wildfires in Alberta have contributed to Canada's sluggish economy and tepid job creation. The country's economy shrank 1.6 per cent in the second quarter, its worst performance since the Great Recession.

"The energy industry downturn continues to be a large headwind to Canadian employment, especially in industries providing higher-wage blue-collar jobs like the resource sector, manufacturing, and transportation and warehousing," Bill Adams, economist with PNC Financial Services Group, said in a note.

Over the year, the natural resources sector is down by 11,100 positions. Manufacturing, transportation and warehousing sectors are also off by about 2,000 spots.

Resource-dependent Alberta has accounted for most of the slowdown. The oil-producing province was the country's growth engine for years until crude prices started to plunge in mid-2014. Last month, Alberta gained 2,700 jobs and the unemployment rate eased to 8.4 per cent. But over the year, the province has shed 53,400 jobs. The losses are across the private sector, from natural resources to accommodation and food services.

"That certainly played a huge role in why the Canadian job market has all but stagnated in the last couple of years," Mr. Porter said.

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Other provinces have also underperformed. Ontario, the country's most populous province, has added 37,200 positions over the year, an increase of 0.5 per cent. Meanwhile, British Columbia remains the country's economic star. It created 72,600 new positions over the year, an increase of 3.1 per cent, with gains across most sectors.

Over all, the public sector added 57,000 jobs last month, with new spots in health care and social assistance. The public administration sector also added new positions, despite a decline in jobs for interviewers and statistical clerks who were hired to conduct the 2016 Census.

The private sector added 8,000 jobs. Self-employment declined by 39,000 positions. August created 22,000 new jobs for younger workers, but over the year this cohort lost 48,000 positions.

Canada's jobs market stands in sharp contrast to the United States, where the unemployment rate has steadily dropped since the Great Recession and is now at 4.8 per cent.

"Canadian labour markets remain consistent with the economic lethargy that has characterized the first half of this year," Brian DePratto, an economist with Toronto-Dominion Bank, said in a note.

Analysts polled by Bloomberg expected the economy to add 14,000 jobs and the jobless rate to rise to 7 per cent.

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