The Canadian economy added far more jobs than expected in January, with Alberta and British Columbia leading the employment surge, Statistics Canada said Friday.

Economists had been looking for the country to create 10,000 to 15,000 jobs last month. But the agency said 88,900 jobs were added.

That unexpected strength led to a big increase in the Canadian dollar. It rose almost three-quarters of a cent to close at 85.30 cents US.

Much of January's job growth was concentrated in the two westernmost provinces — British Columbia created 31,700 jobs, while Alberta contributed another 24,100. All four western provinces managed to post record-high employment rates.

Despite that jobs boom, the unemployment rate ticked up a 10th of a percentage point from December to 6.2 per cent because many more people entered the labour force looking for work.

In fact, Statistics Canada said the share of the working-age population that was employed across Canada hit a record high of 63.4 per cent in January. 

Most of the country's employment growth came in the service sector. Manufacturing continued to be a weak spot in Ontario and Quebec, but strength in factory hirings in Alberta and Manitoba helped to offset the weakness in central Canada.

Aboriginal Canadians flood into labour market

The booming economies of Alberta and British Columbia have persuaded many people to enter the labour market. Statistics Canada said that's especially true for aboriginal people, who have responded to the strong demand for workers in the two westernmost provinces. 

"Since January 2005, employment rates among off-reserve aboriginal people living in these provinces have increased far more than those among their non-aboriginal counterparts," the agency said.

Alberta's 3.3 per cent unemployment rate was again the lowest among all provinces, while B.C.'s 4.3 per cent rate represented a drop of almost a full percentage point — matching a 30-year low set last June.

Ontario, Quebec and Nova Scotia all created jobs last month. But unemployment rates in all three provinces went up as more people flooded into the labour force looking for work.

Newfoundland and Labrador was the only province to lose jobs in January, down 3,100. Its unemployment rate jumped 1.6 percentage points to 15.4 per cent.

Healthy job growth but weak GDP

The unexpected strength in employment had more than a few economists commenting on the continuing disconnect between healthy job growth and weak GDP growth. 

Economic growth in the fourth quarter of last year is expected to come in at an annual rate of just 1.5 per cent or less.

"It may be the case that some of the robustness in the labour market is due to employers holding on to their workers in the expectation that the lull in economic growth will be short-lived," said TD economist David Tulk. "But it cannot explain the astonishing number of new jobs added."

BMO Capital Markets economist Paul Ferley mused that the GDP isn't really as weak as the numbers suggest.

"This report will clearly help ease concerns at the Bank of Canada about the slowing trend evident in the GDP data," he said. "In fact, it raises suspicions that the latter measure is undercounting activity in the economy."

Canadian Labour Congress president Ken Georgetti acknowledged that the job creation numbers are "good news." But he noted that many of the jobs were part-time.

Average hourly wages rose 2.2 per cent between January 2006 and January 2007. But the average drops to 1.5 per cent when the west is excluded, "barely keeping pace with inflation," the CLC said in a release.