Canada's unemployment rate rose to 7.6 per cent in January according to Statistics Canada, a 0.1 per cent increase, as 23,700 more people searched for work.

The Canadian economy added only 2,300 jobs last month, according to figures released Friday. That fell far below the 24,500 jobs that economists had predicted would be created.

'These figures are consistent with an economy fighting to keep its head above water.'—Derek Burleton, deputy chief economist, TD Bank

Last month's numbers were disappointing for anyone looking for work across the country, with the unemployment rate rising in Atlantic Canada and Ontario in January and little changed in the other provinces.

Arguing against austerity

The weak job numbers come as federal and provincial governments are planning to table budgets with deep spending cuts and austerity measures.

"Laying off public sector workers and cutting public spending that supports private sector jobs threatens Canada's soft labour market," said United Steelworkers economist Erin Weir, "Four months of rising unemployment mean the priority should be on job creation rather than cutbacks."

Other analysts echoed this sentiment, with David Madani, Canada economist at Capital Economics, writing in a note to clients that continuing with aggressive cuts "potentially risks injuring the economy."

Bright Spots

There were some bright spots, with an increase in private and public sector employment offsetting a drop of 37,000 in self-employment. Self-employment jobs are generally considered lower quality than employment by the private or public sector.

January was the third month in the last four in which the unemployment rate increased since last September's 7.2 per cent post-recession low.

Jobs lost in construction, professional services

The construction industry experienced a loss of 13,700 jobs, the second straight month of declines for the sector. The drop highlights Canada's "vulnerability to a slowdown in housing," according to Weir.

The professional, scientific and technical services industry lost a record number of jobs, with 44,800 fewer jobs in January. "This substantial loss of jobs in a well-paid area is troubling," said Weir.

Weak outlook for 2012

After a strong start in 2011, employment in Canada has largely stalled since last summer, with fewer than 15,000 jobs being added in the last six months.

Over the last 12 months, the economy has produced 129,000 new jobs, or a 0.7 per cent gain in employment, one of the weakest records in a non-recessionary period in many years.

Compared with the same period one year ago, the number of full-time workers rose 1.2 per cent, or by 170,000. Meanwhile, the number of part-time workers slipped by 1.2 per cent, or by 41,000.

The drop in job creation has coincided with generally weaker economic conditions and declining business confidence due to uncertainty in the global outlook.

"These figures are consistent with an economy fighting to keep its head above water," said Derek Burleton, deputy chief economist at TD Bank.

Most economists believe conditions in Canada, as well as job creation, will remain weak throughout 2012.

"We continue to expect average monthly job gains of about 10,000 per month," said Burleton, adding that job creation will be "more heavily weighted to the second half of the year."

Meanwhile, the U.S. added 243,000 jobs in January, dropping the unemployment rate there to the lowest level since 2009.

With files from The Canadian Press