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Ottawa vows action on jobs as hiring slumps

Job seeks line up at a jobs fair.

Jeff McIntosh/The Globe and Mail

The Harper government promises to attack a jobless rate that is creeping back up and threatens to go higher still as the global slowdown erodes the willingness of companies to hire.

Prime Minister Stephen Harper abruptly shifted his focus this week to job creation, which has stalled in Canada for two months running, saying his government needs to be "flexible" in the face of a weaker global recovery. Other officials drove home that point Friday after the latest reading of the labour market showed the jobless rate inched up in August to 7.3 per cent as 5,500 jobs disappeared.

Canada is not alone, though indeed it is in better shape, at this point, to fight unemployment, the scourge of the post-recession era. Jobless levels in Europe and the United States are far higher, prompting U.S. President Barack Obama to unveil a $447-billion (U.S.) job-creation package on Thursday.

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Friday's report from Statistics Canada showed the country is not immune, as August's job losses followed July's halt to job creation after several months of gains. Some economists believe the jobless rate will inch higher, to 7.5 per cent or more, in the months to come as the troubles in Europe, and more importantly, the United States, ripple through Canada's economy.

While domestic consumption has held up well this year, any slowdown in the jobs market could hit consumer spending and real estate activity. And, unlike the previous slump when the country's jobless rate was around 6 per cent, this time Canada is bracing for a slowdown when it's north of 7 per cent.

Officials in Ottawa have not said what measures they could take. But the 2011 budget contained several targeted measures to create jobs, such as money for energy retrofits and incentives for the private sector to hire. Several of those programs are scheduled to expire with the current fiscal year, though extending some of them would be among the steps the government could take.

"Those are certainly things that would be discussed as we move to the future and we assess the situation in the future," said Conservative MP Shelly Glover, the parliamentary secretary to Finance Minister Jim Flaherty.

"We now see 5,500 jobs that have been lost and so it shows us that we need to do more," she said. "Jobs have to be a priority. Whenever we see Canadians losing their jobs, they have to be our priority."

Mr. Harper's comments on flexibility came Thursday in a speech focused almost exclusively on jobs, and were interpreted by economists as a sign that Ottawa could soften its deficit-reduction plan and opt for new stimulus if the economy worsens.

Science Minister Gary Goodyear said details of such flexibility, if warranted, would come in the next budget. But that isn't expected until February or March, which opposition leaders and labour economists fear would be too late. Just how long Ottawa can wait is shaping up as a key political debate heading into the fall session of Parliament.

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Still, said Mr. Goodyear, "we've shown in the past that we are capable of bringing in a budget early if necessary."

Friday's employment report was skewed by some temporary factors, though it's clear the jobs market has cooled.

Still, John Clinkard, chief economist for Canada at Deutsche Bank AG, sees it as a lull rather than a slump, and said the spate of full-time job growth for much of this year shows the underlying strength in the labour market.

Canada has enjoyed a good run until now. In the past year, employment has grown by 1.3 per cent, or 223,000 positions, primarily in Ontario and Alberta, and in the private sector, Statistics Canada noted. During this time, full-time employment has grown 2.2 per cent while part-time work has fallen 2.3 per cent.

Still, the concern is that turbulence in the United States and Europe will spook Canadian employers. Benoit Durocher, senior economist at Desjardins Group, is one of several economists who thinks the unemployment rate will creep back up to about 7.5 per cent this year, while growth in the labour market gears down.

Lisa Blackburn has seen first-hand how the composition of the labour market is changing. The senior finance leader has been looking for work for the past 11 months, and keeping busy volunteering and networking with several professional groups.

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The jobs on offer, she says, tend to be lower-wage, entry-level positions that are temporary.

"It seems that there are few opportunities and a lot of competition … and apparently employers can be very particular in what they're looking for," says the Oakville, Ont.-based chartered accountant. "There is a movement away from permanent employment to more contract employment."

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