OTTAWA - Canada's economy is expected to shred tens of thousands of jobs in the upcoming months as employers report they are preparing to pare staff and freeze salaries during the recession.
A consensus of private sector economists predicts the next employment report on Friday will show the country lost upwards of 40,000 in January, with some projecting a 60,000 job contraction.
But that represents the tip of the iceberg, according to a survey of 246 companies by the Towers Perrin consulting firm that suggests employers have only begun to cut back.
The once-thriving labour market has become among the biggest concerns for the economy because job losses and lower salaries discourage economic activity and directly impact important sectors, such as housing.
The new survey conducted in January reveals that only seven per cent of businesses reported having made significant staff reductions to date, but another 18 per cent said they were planning or contemplating large cuts in the future.
As well, Towers Perrin said 74 per cent of firms surveyed have enacted or are contemplating hiring freezes, and 41 per cent have imposed or thinking about freezing salaries.
"In the summer, companies were more concerned about attracting and retaining key people, (but) it has literally changed overnight. It didn't go from normal to off, it went from hot to off," said Fiona Macdonald, an executive with Towers Perrin, of employment conditions.
Macdonald noted that a similar poll conducted by the firm's U.S. parent at the same time in the United States showed identical results.
So far, Canada's recent job contraction is not nearly as alarming as the carnage seen south of the border, where more than 2.5 million jobs wee lost last year.
Statistics Canada recently revised down the previously reported 98,000 job gain for 2008 to 80,000, but unlike the U.S., it remains in positive territory.
Michael Gregory of the Bank of Montreal said Canada's economy enters the recession from a much stronger standpoint in terms of its labour market, the relatively sound banking sector and governments' fiscal position.
It was as recently as 11 months ago that Canada's unemployment rate stood at a 33-year low of 5.8 per cent. It is now at 6.6 per cent.
But economists also note that starting in November, Canada's employment numbers beganto resemble those south of the border, after factoring in for population differences.
Scotia Capital economist Derek Holt forecasts the catch-up will be complete with Friday's report. He projects 60,000 Canadians will have joined the ranks of the unemployed last month, similar to the 600,000 who likely lost their jobs in the U.S., which has about 10 times the population.
"The bottom line is that with both jobs and growth Canada and the U.S. are now in lock-step with each other," he said.
"And I think there's a risk we haven't seen the worst monthly job losses yet. We're getting close to the worse in terms of monthly losses, but we're not there yet."
Gregory sees Canada continuing to lose jobs in troubled sectors such as manufacturing and related industries, along with the suddenly weak construction trade.
With most trends pointing south, both in Canada and globally, hopes are being pinned on massive government spending to arrest the slide.
President Barack Obama's US$819-billion stimulus package, which has passed the House of Representatives and is currently being debated in the Senate, is expected to be signed into law within the next two weeks.
Meanwhile, Canada's more modest $19-billion stimulus was expected to pass the House of Commons on Monday night.
But although some measures in the Canadian stimulus package could start boosting the economy soon -- particularly the $3-billion home renovation tax rebate -- the vast majority won't filter through into the real economy for many months.
For instance, Conference Board of Canada analyst Mario Iacobacci says $10 billion of the $12 billion earmarked in the budget for public infrastructure -- including roads, bridges, post-secondary education facilities and projects for aboriginal communities -- will require six-to-nine months before suppliers are selected and work begins.
And other economists have questioned Finance Minister Jim Flaherty's projection of 190,000 jobs saved or created over the next two years, saying the number will be actually far more modest.
"We think the stimulus hits in 2010 as much as it hits in 2009 because it takes a while to get this freight train going," said Eric Lascelles, an economist with the TD Bank.
