Source: The Canadian Press

Canada’s unemployment rate fell to the lowest level in almost two years last month, but all things considered the Statistics Canada jobs report on Friday left little to cheer about outside of Ontario.

The national unemployment rate fell three-tenths of a point to 7.6%, the lowest since January 2009, despite only a modest pickup of 15,200 net jobs.

Finance Minister Jim Flaherty told reporters in Montreal he was “encouraged” by the jobs report, and that he was more concerned that the unemployment rate rose to 9.8% in the United States.

“On balance, we’re progressing as we anticipated we would — modest growth, some improvement in unemployment,” he said.

But with the exception of Ontario — which saw 31,200 jobs created, many of them good full-time jobs — the underlying story is one of overall weakness in Canada’s labour market.

Nationally all of the job gains, meagre as they were, came in part-time positions and in the public sector. Meanwhile, 11,500 workers were dropped from full-time positions and the private sector.

In the underlying numbers, Ontario was the only true bright spot. But economists noted that the province was also the hardest hit during the recession, and is one of the few regions in Canada that still has not recovered all the jobs lost during the downturn.

Statistics Canada said the decline in the unemployment rate was mostly due to 43,600 Canadians — almost all young workers in the 15- to 25-year-old category — leaving the labour market, perhaps because they have become discouraged.

Statistics Canada noted that in the past year about 40% of the 318,000 new jobs created by the economy have been part-time positions.

Scotiabank economist Derek Holt called the results “mildly disappointing,” adding that the unemployment rate will likely rise in coming months.

“The dramatic slowdown in economic growth is preventing any real improvement in labour market conditions,”added David Madani of Capital Economics.

“Not only is the economy struggling to generate enough jobs to have a meaningful impact on reducing the unemployment rate, it is also struggling to produce high-paying, full-time private sector employment, which must be a tad disconcerting for the Bank of Canada.”

The economy has braked sharply since last winter, slowing from 5.6% growth in the first three months of 2010, to 2.3% in the second quarter and 1% over the summer months.

The vast majority of economists expect the Bank of Canada to keep the policy rate at 1% next week, fearing any further increase in interest rates will strengthen the dollar and weaken the recovery.

This could become the bank’s policy for some time, said CIBC chief economist Avery Shenfeld. With the economy flat, bank governor Mark Carney has room to “to hold rates down well into 2011,” he said.

There was scarcely better news in the U.S., which saw the jobless rate rise to 9.8%, as the supposedly recovering economy generated only 39,000 new jobs.

Analysts view the U.S. employment situation as a key marker for the Canadian economy, since the slowdown in growth has largely come in the export sector, particularly goods headed south of the border.

All the Canadian job gains last month were in the services sector, particularly health care and social assistance, wholesale and retail trade, and accommodation and food services.

Meanwhile, the goods producing industries had another bad month, with manufacturing shedding 29,000 jobs. The factory sector is now down to 1.7 million workers, about 47,000 less than was the case a year ago.

“With this decline, manufacturing’s share of total employment continued its long-term downward trend, reaching 10% in November, the lowest since comparable data became available in 1976. This was down from 15% in the early 2000s and 19% in 1976,” Statistics Canada said.

The big gains in November were in health care and social assistance, up by 28,000, wholesale and retail trade, which rose 26,000, and accommodation and food services, which increased by 17,000.

Besides manufacturing, employment in finance, insurance, real estate and leasing rose by 23,000. Construction was flat, but that sector has had a remarkable turnaround in the past year, gaining 89,000 jobs, or 7.5%.