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Canada's government town is holding its breath.

The private and public sectors of Ottawa-Gatineau are united in a collective sense of unease as they wait to see whether billions in budget cuts will deliver economic pain the region has largely avoided.

While politicians on Parliament Hill spent the last three years obsessing over the recession, the local economy has hummed along, largely oblivious to the global financial gloom.

Housing prices rose steeply, unemployment stayed well below the national average and residents waited in long lines to snap up the latest high-end urban condos now peppering the city core. Even the once-struggling Ottawa Senators franchise had no trouble selling NHL tickets during what was supposed to be a rebuilding year.

But now large swaths of the Ottawa-Gatineau economy are on hold.

Home renovations contractor Moe Abbas said fear has cut into his business. Government employees he counts as clients are waiting to find out the fate of their jobs, leaving some to cancel or delay expensive projects.

"It's definitely had a massive impact, not only in people losing their jobs but in the fear mentality," said Mr. Abbas, the owner of Ottawa General Contractors. He believes the uncertainty will last another three months, and could cost him at least $250,000 in business.

"The big concern here is that nobody knows, so once they figure out 'I lost my job or I didn't lose my job,' then everything will be back to normal," he said. "It's just the time of uncertainty."

Canada's national unemployment rate for March inched downward to 7.2 per cent from 7.6 per cent in January, but the unemployment rate in Ottawa-Gatineau has essentially stayed constant over the first three months of 2012 at 6 per cent. During the recession, the unemployment rate peaked nationally at 8.7 per cent but never surpassed 7.3 per cent in Ottawa-Gatineau.

Whatever the job cuts, there will be a "ripple effect" because spending in other areas will also be reduced, meaning there will be less money for goods and services, said Ottawa Mayor Jim Watson.

"There's no question it's creating a lot of angst for people who are in the public service but also for the overall community," he said.

One website focused on local jobs reports that the number of people posting résumés is up about 30 per cent from last year.

"There's been quite an influx," said Geoff Dorken, a regional sales rep for Mr. Dorken said there is still plenty of work in Ottawa provided that job seekers are willing to make do with smaller paycheques.

Polling suggests there will be little national sympathy. A pre-budget survey by Nanos Research found Canadians want to see even deeper government cuts than what the Conservatives delivered.

Ian Lee, a Carleton University professor with the Sprott School of Business, said job cuts are less extensive than those of the 1990s and, like last time, Ottawa's economy will stay afloat.

"I just don't believe that there's any evidence that plausibly, empirically suggests this is going to be an apocalyptic, devastating, moment when Ottawa – as some people have said – is going to be turned into a ghost town," said Prof. Lee, who has studied the local impact of the much deeper government cuts of the mid-1990s.

Job swapping will mean that most employees who leave government will go because they want to, whether they're young employees who want a new career or aging baby boomers ready to retire, he said.

Those workers will take pensions or at least compensation. "In fact, in '95 to '98, the exact opposite happened to the doom and gloom predictions," he said. "The car dealerships and RV dealerships and big ticket home renovation and appliances, they all shot up because people were going out the door with cheques of $50,000, $80,000, $100,000."

Still, there are concrete signs of a slowdown.

Michel Noreau, a Century 21 real estate agent in Gatineau, said there have been fewer people looking to upgrade by buying larger homes.

"Everybody was saying, 'I'm not going to buy a house, I'll wait for the budget,'" he said, adding that he understands the hesitation because his son lost his job at Statistics Canada. In a typical month, Mr. Noreau would sell between 15 and 20 homes, but last month he sold only 10, something he partially pegs on people bracing for the job cuts.

Cindy VanBuskirk, general manager of the Rideau Centre and vice chair of the Downtown Rideau Business Improvement Association, said it's difficult to predict whether businesses will be affected because information about the budget and job cuts is still being revealed.

"The economy in Ottawa did not come to a crashing halt the last time we experienced federal government cuts; I expect it will not come to a crashing halt this time around," she said. "But I think as business owners, we need to be watchful and mindful of what's happening."

Job outlook for grads bleak

Only a few months away from completing his Master of Arts degree in public administration, Sean O'Brady isn't hopeful he'll land a federal government job.

In the past, he said, it was typical for graduates to find government work within three months. Despite his placements at Public Health and Environment Canada, Mr. O'Brady doesn't think he or his peers will be so lucky given the federal job cuts.

"[The departments]want to hire them but they don't have the resources to do it," said Mr. O'Brady, who is also the president of his program's student group at Carleton University.

Most years, graduates of the program stay in the capital, he said. But while he's determined to stay by taking a non-government job or going back to school, he can't say the same for the rest of his class. "There's kind of an exodus, to some extent, compared to before."

The director of Carleton's School of Public Policy and Administration, Susan Phillips, said she hopes the four-month co-op placements that give students real experience are maintained.

In the long-term, she said it's difficult to predict the outlook for students because the extent of cuts is unclear. But Ms. Phillips said she thinks even if there's an initial slowdown in hiring new grads, the government will have to eventually prepare for the exit of baby boomers.

At the University of Ottawa's Graduate School of Public and International Affairs, director David Zussman echoed that sentiment. "Every large organization needs to be replenished with talent," he said.

But whether that will be through contract work or permanent jobs is unclear, he said, as is what the work environment will be as changes to pensions roll out.

Carys Mills