OTTAWA - The Canadian economy had a month for the ages in April, churning out a stunning 108,700 new jobs in a strong signal the recovery has entered a new encouraging phase.

And there was more good news from the U.S. — Canada's biggest export buyer — with data showing the labour market south of the border is also on the mend, producing a massive 290,000 new jobs.

In Croatia, Prime Minister Stephen Harper welcomed the jobs report, but said it's too early for the Canadian government to declare victory over the recession and "take our eye off the ball."

"Obviously, we're pleased to see there's some good economic news . . . that the news has been heading in the right direction for several months ," Harper said in Zagreb, where he is the first Canadian prime minister to visit Croatia since the southern Balkan country became independent in 1992.

"But in my judgment it would still be premature to say things are great in the Canadian economy. Unemployment is coming down (to 8.1 per cent from 8.2 per cent) but it is still too high. We still want to see more progress on that front.

"We are not in a position yet, notwithstanding the good news, to take our eye off the ball."

Finance Minister Jim Flaherty echoed the prime minister's views and said Canada's economy is growing rapidly — 285,000 jobs since last July — because of its strong fundamentals, tax-cutting from Ottawa, diverse industries and a strong financial sector.

"However, there are still to many Canadians unemployed of course and the global recovery remains fragile," he said at a news conference in Toronto.

"That is why we must stay on track and fully implement Canada's economic action plan to help ensure continued job creation and economic growth across the country."

The Canadian and U.S. employment reports were far above economists' expectations, yet still failed to persuade volatile markets that the Greek debt crisis that has roiled stock trading around the world can be quarantined to the other side of the Atlantic.

Toronto and New York stock exchanges continued to bleed red Friday, although nowhere near as severely as Thursday's massive selloff that many attributed to a combination of jitters over European debt, a human error by a "fat fingered" trader, and pure panic.

Meanwhile, the Canadian dollar acted as if it was anxious to go somewhere in a hurry, except it didn't know whether it was up or down. The loonie rose more than a cent after the jobs report, lost it all by mid-morning, and was back more than three quarters of a cent at the close.

The loonie has been sideswiped all week by a flight to safety — U.S. assets — in the wake of fears the Greek disease will spread to other southern European economies and spook financial markets into withdrawing needed credit to sustain the recovery.

With Germany approving its portion of the $145-billion Greek bailout Friday and world leaders huddling over the weekend, Scotia Capital economist Derek Holt said he was hopeful the crisis will be contained.

On the margins, if the contagion does not spread, Holt said the impact may be positive for Canada in the sense that it could restrain interest rate increases and the loonie.

"I'm not entirely convinced that Greece and some of the peripheral economies in Europe can take down the North American economy, especially with job numbers like this," he said.

But Friday's big news in North America at least was jobs.

April's jobs shower in Canada was the biggest one-month nominal pick-up on record and the biggest in percentage terms since August 2002.

The U.S. was nearly as strong with its best month in four years, in additional to upward revisions for the two previous months.

"Clearly what happened in the U.S. will have a greater impact because of the important link we have," said TD Bank economist Millan Mulraine. "The sticker price of 290,000 suggests the private sector is finally revving up their job creation and that changes the tone."

Canada's labour markets had been on the mend since last July, even before the economy began recovering, picking up about 20,000 a month on average. But no one foresaw April's performance.

"This is the long-awaited boost from economic stimulus spending, with full-time jobs coming in construction and being taken up by the group hit hardest by the recession — men over 25," said Ken Georgetti, president of the Canadian Labour Congress.

Will it last? Analysts said 100,000 plus gains were unsustainable, as is the current pace of economic rebound that has been in the five-to-six per cent range over the past six months.

The wind-up of stimulus spending by governments and expected higher interest rates — even without the economic tragedy playing out in Greece — was expected to significantly drag down growth rates as the year unfolds.

In both the U.S. and Canada, the hundreds of billions of dollars in combined stimulus spending — on everything from sewers, bridges, roads and buildings — is creating jobs in related industries such as construction, trade, retail and services.

As well, the Bank of Canada and most recently the TD Bank has projected that one of the pillars of Canadian growth — the housing market, which supports construction jobs and financial services — is due for decline as mortgage rates rise.

Some economists even wondered if April's numbers, which are based on a survey of households, can be taken literally. The last time Statistics Canada went wildly off expectations was September 2008, when the agency reported 107,000 new jobs just as the recession began, only to revise the figure downward later.

"No," said BMO Capital Markets economist Douglas Porter when asked if he believed the 108,700 number.

"I do believe we had a solid month of job growth in April, however," added Porter.

The strong data again opens a new avenue of debate about what Bank of Canada government Mark Carney will do with interest rates.

A few weeks ago, Carney gave every indication he would begin raising rates, if modestly, as early as June 1. But that was before fears mounted over the unfolding sovereign debt issues in Europe, which have potentially serious negative consequences for global growth and credit markets.

Porter said the central bank would likely wait until the last minute to gauge market fallout before making his decision.

"We had a real whiff of fear yesterday, so what's the hurry to raise rates?" asked Porter.

April's surge means Canada has recouped 285,000 — or 68 per cent — of the jobs lost during the recession.

Economists were also encouraged that the underlying data was almost as impressive as the headline. Almost half, 44,000 were full-time work and most industries posted gains. And all provinces were in the plus column, Ontario leading the way with a 40,500 increase

The sole significant disappointment was the factory sector, which had been showing signs of revival of late, dropped 21,000 workers in April.

But there is still plenty of slack in the system, the data shows. Another 92,000 Canadians, encouraged by the better economic prospects, actively started looking for work last month, which helped keep the jobless rate from dropping further than to 8.1 per cent.

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