OTTAWA - Canada posted firmer-then-expected jobs growth on Friday, confirming its recovery is taking hold, with a report that raised rate hike expectations and sent the currency to its highest since July 2008.

Canada's unemployment rate fell to 8.2 percent in February from 8.3 percent in January as 20,900 more people found work in the month,

Statistics Canada said that all the employment gains came from full-time jobs and that the private sector shed workers in the month.

Although the net job gain was less than half the increase of 43,000 jobs in January, it helped boost the total of new jobs added in the economy to 159,000 jobs since July. That helped erase some of the 417,000 in total jobs lost in prior months.

Economists surveyed by Reuters had forecast net job growth of 20,000 jobs in February and an 8.3 percent unemployment rate.

The number is at the high end of the market expectations and all were full time positions. The fly in the ointment is that the new jobs were in public sector, while private paid employment actually fell, said Sal Gutieri, senior economist at BMO Capital Markets.

The Canadian dollar rose as high as C$1.0160 or 98.43 U.S. cents, its strongest level since July, 2008, after the report from C$1.0234, or 97.71 U.S. cents earlier.

Yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, edged higher after the report, showing the market saw tightening as slightly more likely than before the data.

The market suggests there are high odds the rate will be around 1 percent by October. BOCWATCH

Most analysts say the Bank of Canada will not raise its key interest rate until the second half of the year.

In terms of the Bank of Canada it just confirms the view that is already in place, that the fundamentals in Canada are recovering and the outlook is fairly strong, said Camilla Sutton, currency strategist at Scotia Capital.

The increase in full-time jobs in February was partially offset by losses in part-time positions.

Public sector employment grew 1.3 percent compared with a 0.1 percent decline in the private sector. Goods-producing industries added 17,800 jobs, mainly in manufacturing and natural resources. The service sector saw a net increase of 3,100 jobs.

Employment in February and January likely reflected job gains related to the Winter Olympics in Vancouver, a Statscan official said, but the impact on the overall job numbers was not as big as expected.

Men aged 55 or older accounted for all of the employment gains, pushing the jobless rate for that group down to 7.1 percent while the rate for youth aged 15 to 24 ticked higher to 15.2 percent.

The average wage of permanent employees rose 2.5 percent in February from a year earlier, up from 2.2 percent in January. (Reporting by Louise Egan; Editing by Padraic Cassidy)

Canada Unemployment