10/28/2011 12:15 EDT | Updated 12/28/2011 05:12 EST

Canada Jobs Outlook Weak As Questions Linger About Economy: Conference Board


OTTAWA - Unemployed Canadians may find job hunting difficult for the remainder of the year as firms adjust to diminished expectations for growth, a new report suggests.

The Conference Board's monthly help-wanted index survey released Friday found job prospects turned sour in September following the market turmoil that began in early August.

While it noted that the economy created an impressive 61,000 jobs during the month, bringing the total to over 250,000 for the year, conditions appear to be weakening going forward.

The survey conducted early in September found job prospects falling in 17 of 26 metropolitan areas it surveys, including nine out of 10 in Ontario. Only three urban areas — St. John's, Saint John, NB, and St. Catharines-Niagara, Ont. — posted positive results.

Economist Alan Arcand of the Conference Board said the results suggest job growth will be soft in the next two months.

"The Canadian labour market has been pretty strong this year, but given the international context of a weak recovery in the U.S. and issues in Europe, and given that Canada's economy relies on exports, it's not a surprise that we will feel the effects of that," he said.

Most economists are expecting the economy to brake sharply in the final three months of the year in reaction to the market turmoil that began in August and the subsequent hit to business and consumer confidence.

Earlier this week, the Bank of Canada predicted the fourth quarter would see only a 0.8 per cent advance, from two per cent annual growth in the just concluded third quarter.

Because economic reports tend to lag by a month or more in Canada, the first real indicator whether the bleak forecasts are coming to fruition will come Friday when Statistics Canada releases the jobs report for the month of October.

Analysts expect a return to minimal employment growth on the heels of September's outsized number, some of which was based on back-to-school hiring.

The unknown is whether this week's agreement in Europe to backstop sovereign debt and banks with an expanded trillion euro emergency fund based on leverage — no new money has been added — will prove the beginning to a lasting solution to the crisis or more empty promises.

Unbridled investor enthusiasm for the deal lasted only one day. On Friday, North American markets moved mostly sideways.

The Bank of Montreal Benjamin Reitzes said markets are right to be skeptical, but that the deal at least had the effect of putting off the reckoning for possibly a few months.

"This package should at best mark the beginning of the end of the crisis," he said. "At worst, it will buy Europe more time to implement economic reforms and strengthen the monetary union before another inevitable crisis flares up."

The Bank of Canada's latest outlook took for granted that the eurozone would not unravel, but still held that Canada's economy would only squeeze out a 1.9 per cent advance next year, followed by more normal 2.9 per cent growth in 2013. A consensus of private sector economists surveyed by the Finance Department was only moderately less gloomy.

Both are still far too rosy for David Madani, the chief Canadian economist at Capital Economists. His forecast is for Canada's economy to stay weak for the next two years with growth of 1.5 per cent in 2012 and 1.0 in 2013, barely above recessionary levels.

"History shows that financial crises are typically followed by seven lean years of below-average economic growth and persistent high unemployment," he pointed out.

Canada has been able to outperform most advanced economies so far because of a booming housing market, which has kept construction jobs at elevated levels, he added. The boom can't keep up, Madani said, and could in fact in fact turn into a bust.

The relative optimists among economists find comfort in the fact businesses in North America have built up a large store of cash since the recession that they say will be invested, boosting employment and demand, once confidence is restored.