Canadians struggled to find work in February as job creation fell short of expectations with 2,800 positions lost in the month, continuing a trend of disappointing numbers since the summer.
The unemployment rate dropped to 7.4 percent from 7.6 percent in January as more people stopped looking for jobs, Statistics Canada said Friday.
Economists had expected a modest 15,000 pickup in the month, if only because the last seven months has seen job creation slow to a trickle.
Statistics Canada said employment had risen by 121,000 over the past 12 months, but only about 26,000 in the past seven months.
Noticeably in Friday's report was the exodus of workers from the job market last month. Nationally, 37,900 fewer Canadians looked for work in February.
The contraction in the labor force resulted in the drop in the unemployment rate even though there were fewer workers.
Employment among youth, those in the 15-24 age category, also fell for the fifth straight month, dropping another 26,800 jobs in February. A report by TD Bank on Thursday found there are 250,000 fewer young Canadians working today than was the case before the recession hit.
After strong job growth following the 2008-09 recession, Canada has seen this critical aspect of the economy slow and then essentially stall.
The last five months has seen the economy shed over 50,000 jobs.
"The weakness in employment since mid-2011 largely reflects a small crisis of confidence, with businesses remaining reluctant to add to payrolls as rising financial risks in Europe threatened future demand prospects," said TD economist Diana Petramala in a note.
Labor market contraction at a time of rising population is normally associated with discouraged workers giving up on finding employment.
Economists estimate Canada needs to add between 15,000 and 20,000 jobs each month just to keep up with demand from increases in population.
Labor economist Erin Weir of the United Steelworkers noted that along with fewer jobs, the two percent gain in average hourly wages means even those working are not keeping up with inflation.
He called on government's to shift focus from austerity to job creation.
"The priority should be to create jobs through public investment," he said. "The risk is that budget cutbacks will push Canada back into recession by eliminating public-sector jobs and reducing expenditures that help support private-sector jobs."
The biggest losses in February came in the retail and wholesale trade industries, which shed about 37,000 workers, followed by 22,000 job declines in both transportation and warehousing, and health care and social assistance.
Meanwhile, employment in finance, insurance, real estate and leasing rose by 41,000, reversing half the declines in the industries over the past five months. There were also smaller gains in educational services, business, building and other support services, natural resources, construction and manufacturing.