Canadian economy sheds 83,000 jobs in February

TORONTO -- Canada lost a worse-than-expected 83,000 jobs in February as the unemployment rate surged a half point to the highest level in more than five years.

The jobless rate now stands at 7.7 percent, almost a full two points higher than where it was a year ago.

The release of the February report on Friday follows January's record 129,000 contraction.

The financial crisis and the global sell-off of commodities have hit Canada hard. For the past four months, the economy has shed 295,000 jobs in total.

The 83,000 jobs lost in February are more than double what economists expected.

The U.S.-equivalent based on labor market size would be 830,000 jobs lost. The U.S. labor market is about 10 times the size of Canada's.

Prime Minister Stephen Harper said he expects unemployment to rise further.

"We are a part of a very deep global recession," Harper said. "We are seeing and are expecting a surge of unemployment this year."

However, he stuck by his prediction Canada will emerge from the financial crisis faster than any other country.

He said it depends on when the U.S. financial system is fixed.

"It doesn't change our assessment that when the global economy does recover all the demographic indications are that we will have labor shortage," Harper said.

Harper said Canada is doing better than the U.S., but opposition Liberal Leader Michael Ignatieff said Harper needs to stop saying Canada is in better shape. He said Canada is losing 15 jobs for every 10 lost in the U.S.

Scotia Capital economist Derek Holt also said the numbers show Canada is now losing jobs quicker than the United Sates. Last week, the U.S. reported losing 691,000 in February.

"Canada is getting hit on all fronts these days," Holt said. "It's a nationwide downturn that strikes across most major sectors. The central Canadian manufacturing weakness is derived from softening U.S. consumer imports and the speed of project suspension in natural resource sector is bringing down some of the western provinces."

Ontario, the heart of Canada's manufacturing sector, has suffered just over half of the country's total employment losses since October, well beyond the province's 39 percent share of the total working-age population. Employment in the province fell by 160,000 since October.

Alberta's once-booming oil sands sector has cooled as every major company has scrapped or delayed some expansion plans. The province lost 24,000 jobs in February, the biggest drop when scaled to the size of its labor force.

"I can't think of a bright spot in Alberta's economy these days," Holt said. "It's very dramatic. If we go back to last summer they were still looking at $125 billion ($90 billion) in capital projects spending intentions over the next five years. That figure is being shaved by the week. The last one I saw was south of $50 billion ($39 billion)."

Some economists thought January's record job losses were a statistical anomaly but Holt dismissed that after seeing February's number.

Economists have said Canada entered the downturn later other countries and that Canada's performance typically lags the U.S. by six months. Canada and the U.S share the largest trading relationship in the world. More than 70 percent of Canada's exports go to the U.S.

Harper said Canada is entering the most difficult period in memory in a position of significant comparative strength.

The Canadian economy contracted at a 3.4 percent annual pace at the end of 2008, but it wasn't as steep as the 6.2 percent drop in the United States, the 12.7 percent decline in Japan and the 20.8 percent pullback in South Korea.

Canada has avoided government bailouts and has not experienced the failure of any major financial institution. There has been no crippling mortgage meltdown or banking crisis north of the border where the financial sector is dominated by five large banks.

But Holt said Canada is dependent on the price of natural resources and manufactured goods so the erosion in the global economy is starting to hit full force.

"The U.S. went into this first, but of late the pace of decline in the global economy beyond U.S. boundaries is outstripping the problems in the U.S. economy," Holt said. "We've seen an utter collapse in Asian trade and we've seen the pace of decline in GDP reports coming out of Europe. Now Canada joins that."