NIAGARA FALLS, Ont. - Ontario is looking at relaxing welfare rules to allow more people to apply as jobless numbers point to 71,000 more unemployed workers in the province in January.

Premier Dalton McGuinty said he couldn't rule out higher job loss numbers in coming months and the rules around Ontario Works were one of the things Finance Minister Dwight Duncan is looking at as he prepared his budget.

Duncan, who called the jobless numbers "deeply troubling," said there was a "sharp uptick" in welfare claims in the last couple of months of 2008.

The current rules mean that recipients can't qualify unless they burn through most of their assets first.

"As part of our poverty agenda, we are looking at those rules," Duncan said.

"The asset rules really do penalize, in a sense, people."

The latest jobless numbers will hopefully prompt the federal government to take another look at inequities in employment insurance, Duncan added.

"They did a good job on the infrastructure part in responding to the things we've been calling for but now I really think they need to look at the qualification on employment insurance."

Statistics Canada said Ontario shed 71,000 jobs in January - half in the manufacturing sector - as Canada suffered its worst monthly job loss - 129,000 - in at least three decades. Ontario's unemployment rate rose to eight per cent, above the national average of 7.2 per cent.

Both McGuinty and Duncan expressed concern that Bank of Canada governor Mark Carney was too optimistic in his projections that economic growth will begin to rebound next year.

"There's a lot of speculation out there in terms of where we're going to go (with jobless rates), so I don't know with certainty," McGuinty said in Niagara Falls, Ont., while at a Liberal provincial council meeting.

"What I can tell Ontarians is we will find ways to help one another."

McGuinty declined to provide details of his recovery plan, saying they will come with Duncan's budget in early March.

In the meantime, he is dealing with "big questions" following a report he commissioned that suggests Ontario's future depends on developing a new economic model based on brains over brawn.

While it would be easy to fire nurses and cut corporate taxes, McGuinty said, those kind of measures won't lead to long-term solutions.

"This is a very big question and it's going to take a lot of work before we come up and answer this," McGuinty said.

"But what do we need to do to ensure that folks who are losing manufacturing jobs, who are going into service sector jobs - what do we need to do to ensure that they can enjoy a good standard of living?"

Ontario also plans to spend several billions this year on infrastructure projects to match the recently announced federal program, and introduce new legislation in the coming weeks that would tie jobs and economic growth to green energy.

But Duncan said those and other investments are " not going to fix every problem."

McGuinty has sounded the alarm bell in recent days about the state of Ontario's battered economy, warning that the province will face "multi-year" deficits starting with a "significant" shortfall in the upcoming spring budget.

Some have predicted the deficit could reach at least $5 billion this year, taking into account a $500-million shortfall the Liberal government forecast in the fall, as well as the billions of dollars that McGuinty has since promised for infrastructure and troubled automakers.

Chrysler LLC said Friday it will temporarily close four assembly plants next week because of weak U.S. sales, including a factory in Brampton, Ont.