"Jobs and growth will remain our government's top priority," Johnston said.

"In order to accelerate the return to a balanced budget and to eliminate the deficit one year earlier, over the next year we will undertake a strategic and operating review of government spending," he said.

"Our government's plan will put us on a strong footing to resume paying down the federal debt, further reduce taxes on families and continue investing in priorities."

The labour market is not going to create any further inflationary pressure, either coming from wage (gains) or the general strength in the labor markets," said Sebastien Lavoie, assistant chief economist at Laurentian Bank Securities.

In further signs of slowing, Canada's labour report said the economy shed 24,000 full-time positions in February, partially offset by the addition of 39,000 part-time jobs. The number of self-employed workers rose, while the number working in the private sector edged lower.

The February jobless rate was unchanged at 7.8 per cent, versus the 7.7 per cent forecasts by analysts in a Reuters poll.

The average hourly wage of permanent employees — which is closely watched by the Bank of Canada for inflation pressures — rose 2.5 per cent from February 2010, up from 2.3 per cent year-on-year rate in both January and December.

"It probably lowers the probability of any near term tightening by the Bank of Canada and as a result (will) probably weigh on the Canadian dollar," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.

This challenge ... will be more pronounced across the economy than that suggested by the comparatively high rates of unemployment," he said. "The sectoral shifts evidenced across the economy over the past decade — and in particular away from manufacturing to services — has created an increased mismatch in job skills along with the growing problem of skills atrophy."

Long-term, the solution is education and training, but there are limits on what can be done in the near-term, Mr. Burleton said.