The Toronto stock market closed higher Friday as a much better than expected employment report from the United States reinforced hopes that its economy is steadily recovering from the worst recession since the Second World War.

Signs of a recovery in the economy of Canada’s biggest trading partner bolstered investor hopes that demand for Canadian products and resources could soon get a boost.

The S&P/TSX composite index gained 23.8 points to 12,577.28, its best level since early September, 2011 with gains limited by a sharp loss in gold stocks. The TSX Venture Exchange was up 4.54 points to 1,665.11.

The U.S. Labour Department reported that the economy created 243,000 jobs, far higher than the 150,000 jobs that economists had expected. The U.S. unemployment rate fell from 8.5% to 8.3%.

“This was very good stuff to see,” said Pat McHugh, senior portfolio manager at Manulife Asset Management.

“It’s a recurring theme, the U.S. economy isn’t leaving skid marks but it’s chugging ahead.”

A recovery in U.S. employment levels is considered necessary to spur economic growth, which would be good for America’s trading partners, including Canada.

The Canadian dollar was up 0.6 of a cent to 100.64 cents following the positive U.S. employment news

However, Statistics Canada’s report on January economy showed this country created only 2,300 jobs last month, a far cry from the 25,000 that economists had expected. Canada’s national unemployment rate climbed one notch to 7.6%, as more people looked for work.

U.S. markets registered strong gains as a result of the strong employment showing.

New York’s Dow Jones industrials jumped 156.82 points to 12,862.23, the highest since May, 2008, while the Nasdaq composite index gained 45.98 points to 2,905.66, its highest level since December, 2000.

The S&P 500 index rose 19.36 points to 1,344.9.

Oil and metal prices also improved as the American jobs report raised hopes for higher demand.

The TSX energy sector rose 1.05% as the March crude contract on the New York Mercantile Exchange moved up $1.48 to US$97.84 a barrel. Prices had softened since Wednesday when data showed a much larger than expected increase in U.S. crude inventories last week. Cenovus Energy (TSX:CVE) gained $1.08 to $38.80.

Imperial Oil Ltd. (TSX:IMO) shares were up 37 cents to $47.37 after the energy giant said it will go ahead with a $2-billion expansion of Cold Lake oilsands operation in northeastern Alberta. The expansion, to be known as the “Nabiye” project, will add 40,000 barrels per day of bitumen production when it starts up by end of 2014 — a 25% boost in production.

The base metals sector rose almost two per cent while the March copper contract was up 12 cents to US$3.90 a pound. Teck Resources (TSX:TCK.B) gained 88 cents to $43.40 while Ivanhoe Mines (TSX:IVN) rose 57 cents to $16.94.

The financials sector also supported the TSX, up 0.86% with TD Bank (TSX:TD) ahead $1.08 to $78.83 and Manulife Financial (TSX:MFC) was up 41 cents to $12.34.

The gold sector fell about 2.5% as the American jobs data encouraged investors to buy into riskier assets. The April contract moved down $19 to US$1,740.30 an ounce. Barrick Gold Corp. (TSX:ABX) lost $1.13 to $48.59 and Goldcorp Inc. (TSX:G) faded $1.41 to $47.25.

Techs were also weak with Research In Motion Ltd. (TSX:RIM) down 39 cents to $16.78.

Meanwhile, there was further evidence that the 17-nation eurozone is heading for recession.

Eurostat, the EU’s statistics office, said retail sales dropped 0.4% during January, in contrast to expectations for an increase of the same amount.

The December data reinforced expectations that the eurozone contracted during the fourth quarter of the year. Eurostat is due to publish its first estimate for the quarter on Feb. 15.

In earnings news, Domtar Corp. (TSX:UFS) reported fourth-quarter net income dropped to US$61 million, or $1.63 per share, compared to a profit $325 million, or $7.59 per share a year earlier. Sales were flat at $1.37 billion as the paper and pulp producer was affected by both a seasonal slowdown and the rapid decline in global pulp prices. Its shares were up 65 cents to $90.10.

Heroux-Devtek Inc. (TSX:HRX), a Quebec-based manufacturer of aerospace and industrial products, reported it earned $6.9 million, or 23 cents a share for the three months ended Dec. 31. That was 33.8% higher than $5.2 million, or 22 cents earned a year earlier. Sales rose 8.8% to $93.4 million and its shares climbed 39 cents to $8.24.