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A big reason for the jobs decline is the slowing of Toronto’s condo construction boom.Michelle Siu/The Globe and Mail

Slumping activity in Canada's housing and trade sectors bodes ill for a job market that has just run out of steam.

Job creation had been the one positive outlier in a string of economic statistics that pointed to sluggish growth in recent months.

Friday marked a plunge in home construction starts, to the lowest since August, 2009, and a tumble in exports to the United States, Canada's largest trading partner. It also marked the first decline in employment levels in half a year, along with cooling growth in wages.

As the housing market slows, governments pare spending and trade remains weak, last year's rapid pace of hiring may also be petering out.

"I definitely think we're going to have some softening," economist Joshua Dennerlein of Merrill Lynch in New York said of the labour market, citing the outlook for housing and exports.

He projects monthly jobs gains averaging 15,000 in the coming months, a marked slowdown from the 27,000 of the past half year.

Employers shed 21,900 jobs last month as both the public and private sectors cut positions, Statistics Canada said. The jobless rate eased to 7 per cent, its lowest since December, 2008, as fewer people were looked for work.

The size of the labour force tumbled by 57,500, the biggest drop since April, 1995.

The jobs numbers came at the same time Statistics Canada reported that exports to the United States tumbled in December, led by a decline in car and energy shipments. Exports to all of Canada's trading partners slipped 0.9 per cent, though imports fell at a faster pace, narrowing the country's trade deficit to $901-million.

Housing, a long-standing support for the Canadian economy, has now become a "clear drag," warned Bank of Montreal economist Robert Kavcic.

Indeed, the main sources of new employment in recent years have been construction work and public sector jobs, but the outlook for both is diminishing, said Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce.

He believes the slower pace of home building will soon show up in job numbers. "I really think that we're going to see very weak construction jobs over the next six months," Mr. Tal said in an interview.

A big reason for that is the slowing of Toronto's condo construction boom. Fears of an overheated market, coupled with government actions that make mortgages harder to get, have caused developers to scale back or cancel some new projects.

Housing starts over all dropped sharply in January, according to Canada Mortgage and Housing Corp., to 160,577 measured at an annual pace.

The country's labour market is in a period of "disruption" when many employers are hiring and firing at the same time, said Jeff Aplin, president of David Aplin Recruiting, citing energy firms, railways and retailers as examples.

"Organizations are restructuring to become more competitive, more leaner and meaner – so often there's musical chairs depending on who's growing and shrinking," said Mr. Aplin, who is based in Calgary but observes national trends.

In the private sector, Sears Canada Inc., Best Buy Co. Inc., Talisman Energy Inc., Canada Bread Co. Ltd. and Cirque du Soleil have all announced job cuts in recent weeks. Canadian Pacific Railway Ltd. is eliminating 4,500 jobs and, on the public side, the federal government continues to trim its head count as it aims to balance the books.

Among the brighter spots, the youth jobless rate eased to 13.5 per cent from 14.1 per cent, while hours worked rose by 0.2 per cent. Hiring is still strong in technical and professional jobs, such as engineering, geo-science and technology, Mr. Aplin said.

Last month's declines came in education and manufacturing.

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