The Canadian economy gained 41,000 jobs in March, driven by demand for health care and social assistance workers, according to government data Friday which showed a drop in the unemployment rate to 7.1 percent.

It was an improvement from the 7.3 percent unemployment rate in February, the highest level seen in three years.

The March figures were better than expected, with analysts projecting unemployment to hold steady from the February level.

"Employment increased in health care and social assistance, accommodation and food services, professional, scientific and technical services as well as 'other services'," Statistics Canada said.

However, manufacturing employment was down sharply, notching a 32,000 decrease.

Gains in March were driven by the 40,000 new jobs among men and women aged 25 to 54.

However, on a year-over-year basis, employment among the group saw little change, Statistics Canada said.

Unemployment for other age groups was mostly unchanged, at 13.4 percent for people aged 15 to 24 and 6 percent for those 55 and over.

Canada, the world's fifth largest oil producer, has been hit hard by the drop in crude prices.

Employment was up 19,000 in the oil-producing province of Alberta, driven by increases in retail and wholesale trade, contributing to a provincial jobless rate of 7.1 percent.