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Statistics Canada said the country added 94,000 jobs in July as public health restrictions linked to the COVID-19 pandemic continued to be lifted, but economists warned there is still a "long slog" toward a full recovery ahead.

The federal agency said Friday that the job gains caused the unemployment rate to fall to its lowest level since March of this year, at 7.5 per cent for July compared with 7.8 per cent in June.

The gains were seen primarily in Ontario and in the service sector, with 35,000 jobs added in the accommodation and food industry. Full-time work, which rose by 83,000 or half a percentage point across multiple sectors, also delivered growth.

Many economists had expected the country to add at least 100,000 new jobs during July and thought the unemployment rate would sit around 7.4 per cent last month.

Despite falling short of those predictions, CIBC senior economist Royce Mendes said "there's not a whole lot to complain about when the economy creates almost 100,000 jobs in a month."

"That's a sign of recovery, but not a sign of mission accomplished," he said.

July's increase, he said, continues the pattern begun with the 231,000 jobs added in June and can be considered a strong gain, making up for employment losses incurred during the third wave of the COVID-19 pandemic.

But Canada is still 246,400 jobs, or 1.3 per cent, shy of pre-pandemic employment levels seen in February 2020 and threats to the economy's recovery loom.

The number of people considered long-term unemployed — those out of work for more than six months — in July was 244,000 higher than before the pandemic and accounted for 27.8 per cent of total unemployment. Of that number, more than two-thirds have been out of work for a year or longer, Statistics Canada said.

Mendes pointed to scores of companies seeking workers and the virulent Delta variant as potential barriers to recovery.

"It might sound odd to be discussing labour shortages at a time when the unemployment rate is still very elevated, but generous government support, concerns about contracting COVID in high contact work settings and childcare duties are among the reasons there are labour shortages out there," he said. 

Restaurants, retailers and hospitality companies have all reported that hiring has been difficult because Canadians are seeking more stable employment, jobs they can complete from home and assurances that their workplaces won't be temporarily closed if another wave of the virus arrives.

Some have had to resort to remaining closed, hiking pay or offering signing bonuses, extra vacation and other incentives to entice workers.

Even if another wave comes, Mendes doesn't expect another economic contraction or major round of job losses to materialize because vaccinations are keeping large numbers of Canadians out of hospital and the government is opting for more targeted measures to quell the virus.

He also sees room for hiring growth in sectors that already saw big gains like food and accommodations and areas that haven't yet seen a boost like recreation and culture.

But he is still cautious around how much of a recovery these sectors will experience.

"We should expect that over the course of this year and even well into next year, the level of employment in those high-contact service industries will not reach pre-pandemic levels because there will still likely be some restrictions needed to keep virus cases low," he said. 

"When we look out on the horizon, the way the economy might look when it's fully healed, will be very different than it looked pre-pandemic."

Meanwhile, Douglas Porter, BMO Capital Markets' chief economist, predicted the country will see one more employment bump before it settles into a "long slog" as job gains tied to reopening dissipate and the economy begins to more seriously deal with the Delta variant of COVID-19.

He saw positive signs in the number of full-time positions added and the 1.3 per cent increase in total hours worked, though that figure was still 2.7 per cent below pre-pandemic levels.

"It will only take a few more reports like today's to get employment all the way back to pre-pandemic highs," Porter said in a note to investors.

"But this is a sturdy step in the right direction."

This report by The Canadian Press was first published Aug. 6, 2021.

Tara Deschamps, The Canadian Press