OTTAWA -- The Canadian economy created 40,000 jobs in December -- all of it in full-time work -- and drove the unemployment rate to its lowest in four years, Statistics Canada said Friday.

Ontario accounted for about three-quarters of the jobs added across Canada in December and almost all of the other provinces either saw gains or stayed even. The only exception was Nova Scotia, which lost 5,000 jobs.

"We've seen pretty good numbers in four of the last five months, so it does look like there is a bit of strength percolating up late in 2012," said Doug Porter, the Bank of Montreal's deputy chief economist.

He noted the month-to-month moves in the overall number of jobs can be volatile.

"You can get some pretty dramatic swings that end up not meaning a whole lot, but I pay a lot of attention to the unemployment rate and I think it is the single most reliable figure in the labour force report and it did show some real progress at the end of 2012," Porter said.

The federal agency said the national unemployment rate slipped by one-tenth of a percentage point to 7.1 per cent, its lowest level since December 2008.

The results easily topped economist estimates for a gain of just 5,000 jobs nationally and an unemployment rate of 7.3 per cent.

Capital Economics, which has one of the most bearish outlooks on the Canadian economy, noted the strong jobs growth was in stark contrast to the other recent economy data.

Statistics Canada reported last month that the economy grew just 0.1 per cent in October after a flat reading in September and a 0.1 per cent contraction in August.

"We suspect that, unfortunately, the discrepancy will be resolved by a sharp slowdown in employment growth this year rather than a pickup in GDP growth," wrote Paul Ashworth, the firm's chief North America economist.

He noted that the unemployment rate was still well above the average rate of six per cent in 2007 before the financial crisis.

"The recent strength of employment growth will probably convince the Bank of Canada to stick with its existing position that interest rates will eventually need to rise at this month's policy meeting," Ashworth said.

"Nevertheless, we doubt this run of good employment figures will last for much longer and we still think that the next move in rates is more likely to be down than up."

At a news conference at a Ford plant in Oakville, Ont., Prime Minister Stephen Harper noted the jobs numbers were stronger than expected, but cautioned the global economy isn't out the woods yet, with problems still to be worked out in Europe and the United States.

"I always tell people not to read too much into a single monthly number, even though it is a very good number this month," Harper said.

"The trend over the past several years, including over the past year has continued to be quite positive in terms of job growth in this country."

Porter said he will be watching upcoming housing starts and retail sales data for indications of whether the growth in jobs will translate into growth in the economy.

However, despite the gains, he said inflation remains well in check, allowing the Bank of Canada to keep interest rates on hold for the year.

"When you have growth at one per cent and inflation at one per cent, then interest rates at one per cent don't seem too far out of bounds," he said.

December saw 41,200 new full-time jobs added, while the number of part-time positions fell by 1,400.

Compared with a year earlier, Statistics Canada said there were 312,000 more jobs, all in full-time work.

The new jobs were added in a month of much hand wringing over the so-called fiscal cliff in the United States and worries that if a U.S. budget deal was not reached Canada's largest trading partner could be tipped back into recession.

A last-minute deal this week has prevented taxes from rising on the middle class and the poor. However U.S. lawmakers still must wrangle over spending cuts and raising the country's debt ceiling.

Ontario led the way with a gain of 33,000 jobs in December, following a similar increase in November.

Manitoba posted an increase of 5,200, Saskatchewan added 4,000 and Newfoundland and Labrador increased by 2,700.

Prince Edward Island added 1,300 jobs, while New Brunswick, Alberta, Quebec and British Columbia were little changed for the month.

The gains were made in the transportation and warehousing segment which added 22,000 jobs, while the construction industry gained 18,000 jobs.

Professional, scientific and technical services lost 42,000, while public administration dropped 13,000.

Meanwhile, the industrial product price index was down 0.3 per cent in November compared with October, mainly as a result of lower petroleum and coal prices.

The raw materials index fell 1.9 per cent on lower oil prices.