Finance Minister Jim Flaherty said he expects uncomfortably high levels of unemployment to persist "well into" next year, and that he is prepared to do more to help the jobless if the problem becomes worse than he currently foresees.
"I think we have to keep watching and if there are persisting challenges with respect to employment, it might be necessary to do more," Mr. Flaherty said in an interview Sunday.
Rising unemployment rates in the world's major industrialized countries are marring what might otherwise be a triumphant gathering of the world's most influential economic policy makers in Turkey's financial capital.
Finance Ministers and central bankers from the Group of Seven countries said in a statement after their meeting Saturday that there is "no room for complacency" despite evidence that the world economy is recovering from recession because "prospects for growth remain fragile and labour market conditions are not yet improving."
On Friday, as Mr. Flaherty and others began arriving in Turkey for the annual meetings of the IMF and World Bank, a government report in Washington showed the unemployment rate in the world's largest economy climbed to 9.8 per cent in September, the highest since 1983.
The IMF last week revised its forecast for global economic growth in 2010 to 3.1 per cent from July estimate of 2.5 per cent, citing increased factory production, improved consumer confidence and newly stabilized financial markets. But Olivier Blanchard, the fund's chief economist, warned the risks to his forecast were to the downside because unemployment rates in the U.S. and Europe were on track to breech 10 per cent.
Historically, employment lags a broader rebound in economic growth because companies wait for assurances of steady orders before staffing up after a downturn. This recession has taken a heavy toll on the manufacturing sector, shrinking automotive, forestry and other industries. Many economists are skeptical North American and European factory production will return to its previous levels, prompting concern to increased structural unemployment and a jobless recovery.
"There is likely to be a fair bit of restructuring in the U.S. economy," Bank of Canada Governor Mark Carney said in a separate interview. "It is a reasonable expectation that the duration of unemployment will be longer, and unfortunately, it tends to be the case that the longer you are unemployed, the more difficult it is to reintegrate those individuals into the labour force."
While weak, Canada's jobs market isn't as in as bad a state as that of the U.S., Mr. Carney said. However, the U.S.'s struggle with unemployment has implications for Canada because persistent joblessness will weigh on consumption of exports.
"We are not expecting robust growth in U.S. consumption," Mr. Carney said.
Mr. Flaherty isn't prepared to predict that few jobs will be created as Canada's economy rebounds. Nevertheless, he said he is under no illusion that the 2.1 per cent growth rate the IMF predicts for Canada next year will be enough to reverse the firing trend.
"We have to be patient," Mr. Flaherty said. "Our expectation should be that we will have a persisting unemployment problem well into 2010. Our economy will be recovering. We will see some moderate growth in 2010 but the employment numbers will lag the recovery in the real economy."
Canada's unemployment rate was 8.7 per cent in August. Canadian employers have shed 387,000 positions since employment peaked a year ago, Statistics Canada said last month.
A significant portion of the Harper government's economic stimulus program was directed at the unemployed. The government extended the time workers can claim benefits and introduced incentives for companies to share what positions they are will to maintain with more workers, a program that Mr. Flaherty said has helped 165,000 people.
The government also is encouraging unemployed workers to learn new skills, which Mr. Flaherty said is essential for former manufacturing workers whose former plants are unlikely to ever come back on line.
Mr. Flaherty met with his counterparts in the G7 Saturday and will attend a meeting of the IMF's steering committee and chair a gathering of finance ministers from the Western Hemisphere Sunday. He is set to join a meeting of the World Bank's steering committee on Monday.
The minister said he's heard nothing yet to change his cautious outlook for the global economy.
"I have been quite cautious about any suggestion that we are out of the woods," Mr. Flaherty said. "We are not."Report Typo/Error