OTTAWA - The Canadian economy rose from the ashes last month, creating thousands of new jobs in a surprisingly strong result that defied economist expectations and strengthened the Canadian dollar.

The economy created 27,100 new jobs in August, with the added bonus that the pivotal private sector finally kicked into gear after 11 months of shedding jobs, adding 49,200 workers in that category.

Although most of the new net jobs were part-time positions, economists said any growth so early in the recovery is significant.

"It just reinforces the view that the recession has ended and that we're in the early stages of a recovery," said Douglas Porter, deputy chief economist with BMO Capital Markets.

Liberal Leader Michael Ignatieff insisted the surprising development does not change his plans to topple the government this fall. Speaking in Vancouver, Ignatieff said he still believes the government has badly mismanaged the economy and deserves to be defeated.

"A million and a half Canadians are looking for work, bankruptcies are up 50 per cent and we are staggering along with a $50-billion deficit and the OECD says we're going to have the slowest and most painful recovery of any country," he said.

"Our view is this just isn't good enough, that we can do better."

His finance critic John McCallum, a former chief economist with the Royal Bank of Canada (TSX:RY), said in an interview the government must take the blame for a relatively sluggish bounce from the slump on not moving quickly enough to inject stimulus into the economy.

An election is not certain, since both the New Democrats and Bloc Quebecois must vote with the Liberals in order to topple the minority Conservatives.

Speaking in London, where he was attending an international meeting, Finance Minister Jim Flaherty told reporters the economy was "stabilizing" and that there was no need for additional stimulus.

In another report Friday, the Harris Decima polling firm said consumer confidence in Canada rose to the highest level in two years in August.

The jobs report lit a fire under the loonie shortly after the 7 a.m. EST release and it kept rising throughout the day, closing up 1.38 cents at 92.02 cents US.

Not all of the news in the jobs report was positive, however.

Economists noted that the Statistics Canada monthly jobs survey is notoriously volatile and that the details of the August report are not so impressive as the headline numbers.

For instance, the unemployment rate edged up one-tenth of a point to 8.7 per cent -- the highest in 11 years-- as more Canadians began looking for work.

Also, Canada remains a long way from returning to the situation of a year ago, before the global recession took a firm hold last October.

-- August brought a continued deterioration of full-time work, with 3,500 additional job losses bringing the total since last October to 486,000.

-- There were almost 50,000 Canadians out looking for work last month, meaning that the number of officially unemployed rose by 21,900.

-- Most of the pickup was in the lower paying service sectors, while high-paying, high-productivity manufacturing work continued to be scarce, falling by another 17,300.

-- Hourly wages were 3.3 per cent above last August levels, the lowest growth rate in more than two years.

Still, the gains in part-time work, all in the private sector, and the noticeable slowing in the hemorrhaging of full-time employees in the past several months will be seen as welcome signs for the economy going forward.

Scotiabank economist Derek Holt said the jobs report -- as imperfect as it was -- will support the Canadian dollar in the short term, but is unlikely to impress the Bank of Canada from moving off its stimulus policies until there is more concrete and widespread evidence of an economic rebound.

The trend line is encouraging, however, Statistics Canada pointed out.

Since October, Canada has lost 387,000 jobs, but only 31,000 of those have come in the last five months.

"In the five months following the employment peak of October 2008, employment fell in almost all industries, especially manufacturing and construction," the agency noted.

"In the past five months, however, while manufacturing has continued its decline, employment in construction has stabilized and it has increased in most service industries."

In August, 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. Adult women were the most successful in finding jobs.

Losses came in business, building and other support services, education services and the battered manufacturing sector.

Students continued to experience the worst of summer job markets, however, with the average jobless rate hitting 19.2 per cent, 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 five per cent.