OTTAWA–The latest wave of job losses shows the economic stimulus package delivered by the Conservatives only last week may be too little, too late to help Canada cope with the global recession, Liberals say.

In the worst employment showing in decades, the Canadian economy shed 129,000 jobs in January as the unemployment rate shot up to 7.2 per cent from 6.6 per cent the previous month, Statistics Canada said. Nearly all the jobs lost were full-time positions.

The recession hit hardest in Ontario, where 71,000 jobs disappeared, pushing the unemployment rate to 8 per cent – the worst in the province since November 1997.

Despite Finance Minister Jim Flaherty's planned injection of $40 billion in stimulus into the economy over two years, there is speculation the Conservative government has not done enough to revive slumping business conditions.

"If these negative trends in employment continue, there could be a need for more fiscal action before we break for the summer," Liberal finance critic John McCallum said this morning.

He suggested the economy has been so flattened by the global slowdown the Canadian government may be forced to make another effort to revive economic activity with more government spending and tax measures by June.

The worsening job statistics reinforced the argument Prime Minister Stephen Harper's government badly underestimated the difficulties facing the Canadian economy, McCallum said.

"It's only a few short months ago that they were saying the Canadian economy was as strong as the Canadian Shield and we would have nothing but budget surpluses.

"In part, it's the world changing quickly, but I think they were certainly far less aware than virtually every other government" of the severity of the coming recession, McCallum remarked.

Harper said in Miramichi, N.B., today that the latest figure of 129,000 lost jobs is bad news but his government won’t change its approach to solving the economic crisis, the Canadian Press reports.

Later, in an interview with CTV broadcast in the Maritimes, Harper said economic forecasters have been unable to call the recession accurately, but Canada is still in a better position than most countries to deal with the global downturn.



“We’re in a period where, the truth is, people just don’t know exactly what’s happening,” he said.



“We know two things. We know it’s going to be difficult, it’s going to be more difficult in the months to come, but we also know so far, and this is the one thing I think to take some solace from, is that Canada remains in a relatively good position compared to all these other countries.”



In Niagara Falls this morning, Ontario Premier Dalton McGuinty lamented the "pretty serious job-loss numbers."

"The American economy continues to falter and Canadians and Ontarians continue to pay a price," McGuinty told reporters at a Liberal caucus meeting here.

"I think it's important to keep in mind that the number's even larger in terms of who's affected by this," he said. "If a family loses a job, not only does it affect the mum or the dad, but it affects the spouse or the kids and then there's a heightened sense of anxiety among all those who have not lost their job."

Ontario Finance Minister Dwight Duncan said unemployment data was as bad as the provincial government had feared

"We expected this. They're obviously deeply troubling," Duncan said.

"It reminds us just us how deep this global crisis is and calls on us to redouble our efforts as we move forward," he said.

Duncan, who is readying a budget to be tabled within the next four weeks, said he is expecting "quite a dramatic decline" in corporate tax revenues, which will affect the government's planning.

Statistics Canada said the manufacturing sector that is centred in Ontario and Quebec dropped 101,000 jobs in January, the worst decline ever recorded. The employment declines were most pronounced in vehicle manufacturing. But layoffs were widespread, including in furniture, computer and electronics, non-metallic mineral products, electrical equipment and clothing production.

"I can't see one glimmer of hope in this report when we dig beneath the headlines," said Derek Holt, economist at Scotia Capital.

"The optimists are just taking body blows all over the place here," he said.

The monthly drop in employment, far worse than expected, single-handedly wiped out the net job gain in 2008 of less than 100,000. Canada has shed 213,000 jobs since October.

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Analysts in a Reuters poll had forecast a job loss of 40,000 and an unemployment rate of 6.8 per cent.

The monthly decline was also bigger than any seen in the previous economic troughs of the 1980s and 1990s, Statscan said. That raised fears this recession will be deeper and more protracted than policy-makers have predicted and that the Bank of Canada will be compelled to cut rates further from their 50-year low of 1 percent.

"Everybody is prepared for a pretty weak first quarter, but these numbers are probably surprising the more bearish views," said Craig Wright, chief economist at the Royal Bank of Canada.

Many economists disagree with the Bank of Canada's projection the economy will recover more quickly than in past recessions, with growth returning in the third quarter. Last month it projected the economy would shrink 4.8 per cent in the first quarter after contracting 2.3 per cent in the fourth quarter of last year.

Sal Guatieri, senior economist at BMO Capital Markets, said Canada was in for more carnage in the labor market in coming months.

"This is the start of a wave of job losses that will likely extend through the first half of this year," he said.

Canadian companies have been announcing massive layoffs on an almost daily basis. Montreal-based aircraft maker Bombardier was the latest, saying on Thursday it would cut more than 1,300 jobs due to a softening market for business jets.

The last time the unemployment rate hit 7.2 per cent was in November 2004.

Flaherty had hinted on Thursday the report would be grim, saying the job numbers would be "very regrettable" and there was a risk that Canada's recession would get much worse.

The news was also bad in the recession-battered United States, where layoffs have been biting for months. U.S. employers eliminated 598,000 more jobs in January, the most since the end of 1974, sending the unemployment rate to 7.6 per cent from 7.2 per cent in December.

The numbers in the U.S. Labour Department's report, released Friday, were far worse than the 524,000 that economists expected. Job reductions in November and December also were deeper than previously reported.

All told, the U.S. economy has lost 3.6 million jobs since the recession began there in December, 2007, with half of those losses coming in the past three months.

With files from Reuters

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