The Canadian economy lost 34,400 jobs in December, driving the unemployment rate to 6.6 percent, Statistics Canada said in a fresh sign of recession gripping the nation.

It was the second month of heavy job losses, after 70,600 were shed in November. The unemployment rate rose to 6.6 percent from 6.3 percent in the prior month.

The numbers were worse than most analysts’s projections of 22,000 job losses and a 6.5 percent jobless rate in December.

And Finance Minister Jim Flaherty said the situation will only get worse in the short term.

“We’re in for a very difficult year,” Flaherty told reporters. “We regrettably are going to have to expect continuing job losses in Canada.

“We are going to have substantial job losses,” he added.

December’s employment decline was led by a drop in construction, one of the biggest monthly losses for that industry in the past three decades.

Some 44,000 construction jobs were lost, as housing starts decreased to their lowest level in seven years the previous month, according to the Canadian Mortgage and Housing Corporation.

This was partially offset by an increase in transportation and warehousing.

“The job market is running out of steam,” said analyst Pascal Gauthier of TD Securities.

“We believe that the Canadian economy entered a recession in the fourth quarter. Or if we’re not there yet, we’re knocking at the door,” he told the media.

Sherry Cooper, chief economist of BMO Capital Markets, echoed in a research note: “Today’s dismal data offer additional strong evidence that the Canadian economy has quickly waded knee-deep into the recession swamp.”

For all of 2008, Canada’s employment rate increased 0.6 percent with the creation of a total 98,000 jobs, significantly slower than the 2.2 percent job growth observed the previous year.

Gauthier too commented that the dismal December figures are “indicative of what’s to come.”

“In a typical recession, we can expect 15,000 to 30,000 jobs being cut each month,” he said.

But Canada is still faring better than its neighbor and biggest trading partner, the United States, Flaherty and analysts agreed.

The United States lost 524,000 jobs in December.

Agencies

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