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Canada Unemployment Rate Inches Up To 7.5 Per Cent Despite Modest Growth In Jobs

OTTAWA - Job creation in Canada resumed again last month after two straight setbacks, but details in the latest labour report pointed to an economy struggling to achieve lift, particularly in the country's two biggest provinces.

Statistics Canada said 17,500 jobs were created in December, slightly below expectations, with every province except Quebec registering gains.

The good news ended there, however, as all the gains were part-time and among the self-employed.

Employers actually shed 13,600 workers in December and full-time jobs fell even further, by 25,500.

Most troubling was that the unemployment rate rose for the third consecutive month to 7.5 per cent, the highest level since April, as an increase in Canadians seeking work pushed the official jobless toll above 1.4 million.

Prime Minister Stephen Harper, speaking to reporters in Edmonton, said he was "very happy" to see some job creation in Canada last month as well as a return to jobs growth in the United States, by far the country's largest trading partner.

"This has been one of the things that's been lacking over the past couple of years. We've seen some 600,000 net new jobs created in Canada but we haven't been seeing the kind of job growth we need in the United States to help with our trade."

"Obviously the news is not all good in the jobs report," Harper added, saying that it "reminds us . . .that the global recovery is very fragile."

Avery Shenfeld, chief economist with CIBC World Markets, also saw some positives in the report, saying "we've staunched the bleeding in terms of ending outright job losses, but if you step back and look at the three- or six-month trend, this is still a soft labour market in Canada."

"The problem is we need stronger economic growth to generate the need to hire ... the economy can be described as mediocre."

Bank of Montreal economist Douglas Porter called it "highly unusual" for the unemployment rate to keep rising in the middle of what is supposed to be an economic expansion.

"I was happy to see a plus sign ... (but) I'm not completely relieved."

Markets also saw the report as a net negative, dropping the Canadian dollar about half a cent to 97.61 cents US in early trading.

Quebec was particularly hard hit last month, losing 25,700 jobs in addition to the combined 16,600 decline in October and November. Ontario saw a modest 15,700 increase but remains down over the past three months.

Analysts said the high Canadian dollar and soft world demand is partly responsible for the poor employment record in Central Canada in recent months since the region has a high level of factory jobs that depend on exports.

But Quebec's sharp retreat may have another origin, said Porter. He said the province was first out of the blocks with stimulus spending during the recession and first out during the recovery. As well, Quebec's sales tax increases may be depressing consumer spending.

A flat or weak labour market means more and more Canadians will join the ranks of the unemployed because the population keeps growing faster than job spaces.

With a new federal budget expected within two months, opposition parties have renewed calls for additional job creation measures, such as infrastructure spending.

In his remarks in Edmonton, Harper his government intends to continue on the next phase of Canada's economic action plan, including keeping taxes low and taking action to reduce the deficit and avoid the debt problems experienced by many other western countries.

"We're going to continue to make key investments in training . . . but also things like research and infrastructure and we're also going to continue to fight protectionism and to work to open trade opportunities for Canadian firms," he said.

Economist Mary Davis at the University of Toronto's Mowat Centre, which recently published a comprehensive report on employment insurance, said at the very least Ottawa should reform the current EI system.

She notes that the number of unemployed collecting benefits is falling as the number of jobless is rising because some workers have exhausted their allotment, or because many workers who have been forced to accept temporary work or moved to self-employment are not covered.

"They have to change the EI system so it better responds to the new worker and that's the person who has multiple jobs, is self-employed, is part-time, or is in and out of the labour market," she said.

The report's key recommendation is for the creation of a "temporary unemployment assistance program" at a cost of $900 million for people who can't access EI or have exhausted their benefits.

The good news in Friday's economic developments came from Washington, where the Labour Department calculated the United States added 200,000 new jobs in December, dropping the unemployment there to 8.5 per cent, the lowest in almost three years.

A recovery in the U.S. would be welcomed by Canada's battered manufacturers and exporters since about 70 per cent of Canadian shipments head south of the border.

December's Canadian employment report continues a trend of mostly disappointing numbers in the second half of 2011.

The total job increase for the year was 199,000, but almost all came in the first six months.

In December, manufacturing accounted for all and more of the jobs increase, adding 30,400 workers, while construction saw a drop of 12,000. For the year, however, the factory sector remains in the hole by 50,000 jobs.

The services sector has been responsible for almost all the job gains for the year as a whole as employment rose significantly in the accommodation and food services industries, along with professional, scientific and technical services, the agency said.

Meanwhile, overall employment in the goods-producing sector was flat with gains in natural resources and construction cancelled out by declines in utilities and manufacturing.

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