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Job Seekers visit the Canadian Border Service Agency stand at the Bi-lingual Job Fair and Training Expo in Toronto on Thursday March 8, 2012 .

Chris Young

An eight-month stretch of meagre job creation is driving more Canadians out of the labour force, especially the young.

The country's jobless rate fell two notches to 7.4 per cent in February, but that was because fewer people were looking for work, rather than any pickup in the labour market, Statistics Canada said Friday. The country's labour participation rate has ebbed to its lowest level in a decade.

Young people are leading the exodus. Their jobless rate hit 14.7 per cent last month – its highest level since October, 2010 – amid five straight months of employment declines. Poor prospects mean almost 200,000 of them have left the labour force since the recession began. The youth participation rate has tumbled to a 16-month low and is approaching 1995 levels.

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"This is a really significant issue," said Francis Fong, an economist at Toronto-Dominion Bank who wrote a paper this week predicting the youth jobs market will remain tough for years to come.

That's in part because older workers are staying on the job. Many are delaying retirement – for both voluntary and involuntary reasons – which means fewer new jobs are opening up. Of those that do, young people must now compete with more experienced workers.

"This generation of younger workers are our future labour force … and they are facing some pretty unique pressures that other generations didn't have to go through," Mr. Fong said.

He said the economic consequences will include muted consumer spending among the young, heavy debt loads and delayed home buying.

Among the university crowd, the mood is one of a deep sense of frustration, said Sara Taddio, a musician who is studying public relations at McGill University. She said her job applications have gone unacknowledged.

"I'm 22, I have the technical tools and enough drive and ambition – I just want to get my life started," she said, adding that most employers are opting for more-experienced candidates.

Canada's economy shed 2,800 jobs in February, the second month in a row of little change. The public sector dropped 13,400 positions, and is expected to fall further this year. Private-sector employment slipped by 1,700, while self-employment – often seen as lower-paying positions – rose by 12,300.

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It wasn't just young people who left the work force; other demographic groups exited the labour market as well. Canada's participation rate fell to 66.5 per cent last month, the lowest since April, 2002.

The slide "is a sign of serious disengagement from the formal economy," said Jim Stanford, economist at the Canadian Auto Workers.

Statscan's broadest measure of unemployment is the so-called R8, which includes discouraged workers and those working part-time who would rather have a full-time job; that measure stood at is 11.4 per cent in February, a slight improvement from 11.7 per cent a year earlier.

The federal budget on March 29 is expected to show cost cutting and possible public-service layoffs as part of its plan to trim the deficit.

Job creation remains a focus, Prime Minister Stephen Harper told reporters in Toronto on Friday. "We will not keep our eye off the ball and there will be a lot of measures in the budget to create jobs and to get us on a long-term, sustainable track."

That may not be easy. Private sector employers may rethink their hiring spree of the first half of 2011, and instead focus on boosting productivity, while public sector employment – a key source of growth in recent years – will decline outright, predicts Scotia Capital economist Derek Holt.

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The pace of job creation this year will be half the rate of 2011, at 11,000 jobs or less a month, he believes.



With files from reporter Kelly Grant in Toronto.

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