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The main driver of job creation in the coming years will be Canada's small and medium-sized businesses, a report said Wednesday.

"Highly entrepreneurial small- and medium-sized businesses in rapid-growth areas will likely be a key source of Canadian job creation over the next decade" as the economic recovery takes hold, said Bank of Nova Scotia chief economist Warren Jestin.

These companies must find value-added, skill-based Canadian products and services that can plug into global supply chains or take advantage of niche market opportunities in new markets, he added.

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Job creation is emerging as a key priority in both Ottawa and Washington after the recession obliterated thousands of jobs. U.S. Treasury Secretary Timothy Geithner yesterday said that help to small businesses is central to the government's effort to boost jobs and support a recovery.

The report comes as Canada's federal government is preparing its budget on March 4. Any policies that assist smaller businesses tend to help with job creation and economic stability overall, Canadian Federation of Independent Business president Catherine Swift told a pre-budget committee this week. The Canadian economy shed more than 300,000 jobs in the downturn, and "virtually all" of those reductions came from large corporations, she said.

Canada's small and medium-sized businesses, meantime, are starting to trust the recovery is real.

Small-business confidence climbed last month, returning close to levels last seen in the fall of 2009, CFIB's monthly survey showed Wednesday.

But most see no imminent change to their staffing levels. Nearly three quarters, or 71 per cent, say they don't see a change in their full-time employment levels. Fourteen per cent plan to increase their head count while 15 per cent intend to decrease staffing.

The most optimistic business owners tend to be in business and professional services, along with health-care and education. The most pessimistic owners are in the restaurant and accommodation sectors.

Business owners in Nova Scotia, British Columbia and Saskatchewan are the most upbeat in the country.

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Entrepreneurs should go global, or diversify into new markets if they want to accelerate growth, Scotiabank's Mr. Jestin said.

"Demand from China and other emerging markets has already helped push commodity exports to roughly half of Canada's foreign sales," he said. "Rising incomes in these nations will underpin rapid growth in consumer spending, providing important new opportunities for Canadian businesses."

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