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Flaherty may have cut more had he known jobs numbers

Finance Minister Jim Flaherty listens to a reporter's question in January during a media availability session prior to holding pre-budget consultations in Vancouver.

JOHN LEHMANN/JOHN LEHMANN/THE GLOBE AND MAIL

If Jim Flaherty knew then what he knows now the federal budget might have been a lot tougher.

March's spectacular jobs gains suggest the Canadian recovery hasn't stalled out after all.

Life is good, or at least, much better. Reversing a string of stagnant monthly jobs reports, the economy added 82,300 jobs in March and the unemployment rate dropped to 7.2 per cent from 7.4 per cent.

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Compare that to the previous six months, when gains averaged just 3,100 per month.

Throw in the steadily improving news on the U.S. economy and receding fears of a major spillover from Europe's debt woes, and the picture is a lot brighter.

The economy is certainly looking better than when the finance minister was putting the finishing touches on his 498-page budget in February and early March.

Through the end of last year, and as recently as early February, Ottawa seemed to be preparing Canadians for a very tough budget – something significantly worse than the original plan for roughly $4-billion over four years.

Treasury Board President Tony Clement, who's responsible for downsizing the federal civil service, began talking of cuts of up to $8-billion.

Modest cuts became really deep cuts.

It was after all the Conservatives' first majority budget -- a rare opportunity to make tough, unpopular choices.

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Then, with the March 29 budget date nearing, the messaging shifted abruptly. Mr. Flaherty began talking of a "modest" and "moderate" budget. Economists read that to mean: closer to $4-billion than $8-billion.

The final damage: $5.2-billion in cuts.

Could it be that Mr. Flaherty and Prime Minister Stephen Harper got cold feet. Maybe they dialed it back, worried that deep federal cuts, compounded by Ontario's fiscal troubles, might tilt the Canadian economy back into recession.

Looking at the March jobs number, that prospect looks remote.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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