The recession is over, but not the pain.

Canada’s central bank predicted Thursday that the economy would expand this quarter, suggesting the economic contraction lasted for about nine months, considerably shorter than the previous two recessions in the early 1990s and the early 1980s.

The Bank of Canada’s reassessment of the state of the economy is perhaps the clearest signal yet that the worst of the recession is over.

Buoyed by the prospect of better days ahead, investors rushed to buy Canadian stocks, adding new life to an near five-month rally that economists said has played a big role in reversing Canada’s fortunes.

The Standard & Poor’s/TSX Composite Index rose 243.33 points to 10,675.68, the highest in six weeks. Canada’s dollar jumped about 1 per cent to 92.04 U.S. cents, the strongest in almost two months.

Yet Bank of Canada Governor Mark Carney stopped short of celebration, saying it will take more than a year to replace the wealth destroyed by the financial crisis.

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The Canadian economy saw an unexpected increase in jobs during April, despite a deepening economic recession, leaving the unemployment rate at 8%.

Statistics Canada said 35,900 positions were added during the month, driven by an increase in self-employment.

“Despite this increase, overall employment has fallen by 321,000 since the peak in October 2008,” the federal agency said.

“The unemployment rate was unchanged at 8% in April, remaining at its highest level in seven years, with the growth in employment coinciding with an increase in the labour force.”

Most of the job gains were in the information, culture and recreation sectors, as well as business, building and agriculture, the agency said. Employment levels were unchanged in the manufacturing and construction sectors.

Most economists had expected 50,000 job losses in April, with the unemployment rate rising to 8.3%.

“Now that’s what I would call a green shoot,” said Douglass Porter, deputy chief economists at BMO Capital Markets.

“While quite encouraging, it’s important to recall that head fakes are always possible – employment managed to rise in 5 separate months in 1991, in the middle of a lengthy, deep recession. And some of the rise may reflect a bounce from the extreme drop at the start of the year,” he said.

“Still, this marks a huge improvement from the wicked job losses seen over the winter, and is yet another strong signal that the economy may be approaching bottom – certainly sooner than most forecasters believed possible just a few short weeks ago.”

Statistics Canada said self-employment accounted for 37,000 of the positions created in April, while the number of employees in the public and private sectors was little changed.

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Peter J. Thompson/National PostKunal Gupta, chief executive of Polar Mobile.

Despite the economic gloom and waning confidence in corporate Canada, young people, fuelled with ambition, are choosing to take a risk and launch their own business.

Organizations that provide resources and funding report a marked increase in applications and interest by prospective entrepreneurs.

“Many from my generation tried to break into large organizations like our parents did, but found we weren’t going to have the same job stability,” says Dawn Deane, who quit her fledgling career with a major bank to open a Montessori school in Whitby, Ont., last fall.

“You know that at any time you can be given a pink slip, especially in this economy so with this unrest and having the rug pulled from underneath us has made it easier to take a risk and the risk that’s associated with becoming self-employed is actually less than putting all your eggs in one basket and committing to corporate Canada.”

Ms. Deane had mentoring and support from the Canadian Youth Business Foundation (CYBF), which has seen a 68% increase in applications within the first fiscal quarter this year.

Likewise, the Impact Entrepreneurship Group is flourishing since the economy soured. “There’s been a significant increase in interest,” says Kunal Gupta, who founded Impact in 2004 while attending Ontario’s University of Waterloo. “There are opportunities in the market for young entrepreneurs that would not be seen in a good economy.”

Mr. Gupta, who launched Polar Mobile after he graduated, a company that develops a proprietary content and advertising platform for mobile devices, still serves as chairman of Impact’s board and says the breadth of students participating has grown to include those from arts and other studies outside business.

In the past year, Impact – which bills itself as Canada’s largest, non-profit student-run organization – opened offices in Calgary and Vancouver. Its programs target university and high school students and include a national annual conference, an entrepreneurship week campaign, a leadership summit and a Microcredit Competition that gets underway later this month for which teams of students from 200 high schools receive $100 to launch a business idea and make as much money for charity as possible within a week.

The organization has acquired the support and sponsorship of corporate leaders and entrepreneurs who pioneered successful businesses in Canada.

Alex Shipillo of Vancouver, heads Impact’s Microcredit Competition and co-founded Youth Canada to help high school students navigate university scholarship programs. The two groups amalgamated in 2006 to promote entrepreneurship to young Canadians.

“This is the first recession of my lifetime,” says Mr. Shipillo, who plans to start a business after graduating from university. “There’s no longer any guarantee we’ll get a good job after university.”

Ray Cao started EightyTwenty Group, a software company that is poised to double its staff in the coming months. He served a term as president of Impact while studying at University of Waterloo and remembers a survey of high school students Impact conducted to assess their perception of entrepreneurship; 70% responded it was a path of last resort for those who had dropped out of school or failed to find jobs.

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It’s a major reversal from even last August, when government officials were projecting Alberta would rake in an $8.5-billion surplus by the end of the 2008-09 fiscal year.

Alberta Finance Minister Iris Evans said the province’s Heritage Savings Trust Fund, a rainy-day savings hit, has been hit particularly hard by the current global financial turmoil. There are estimates its value has dropped by $3-billion from $17-billion.

She said the Progressive Conservative government, which has governed Alberta since 1971, is looking at ways to cut spending. However, she said the government has no immediate plans to abandon a $2-billion carbon capture and storage project. The aim of the project, in part, is to clean up the province’s image as an environmental wasteland.

Ms. Evans said that while Alberta has entered a “sharp period of recession” and will likely shed 50 jobs a day in the coming year, its economic position is still enviable when compared to other jurisdictions.

“This is like riding a very bad tidal wave, but in the best boat possible,” she said. “Alberta has absolutely got more resources available to it than anybody else facing a decline. Where are they going to get the money from?”

Opposition parties have been warning for years that the Tory government’s spending was out of control, and that it was not doing enough to save the eye-popping surpluses it was reaping from soaring oil and natural-gas royalties.

In 2007, the finance minister of the day, Lyle Oberg, speculated a deficit was possible if the province could not rein in its runaway spending. Since 2005-06, total government spending has jumped at least 32 per cent and per capita spending has been higher than that of any other provincial government.

Economist Andre Plourde says it should come as no surprise that the resource-based economy is taking a hit now that oil prices have dropped from a summer high of US$147 a barrel to below US$35.

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Some 91% of respondents in an opinion poll from market research firm Pollara said the country was already in recession. Over 55% expect economic conditions to deteriorate further, data from the Toronto-based pollster revealed.

National gross domestic product shrank 0.1% in October, according to Statistics Canada, while economists predict the economy contracted through the entire fourth quarter. StatsCan reports November GDP on Jan. 30. A technical recession is at least two successive quarters of negative growth.

“A majority of Canadians expect 2009 to be a year in which the Canadian economy worsens, employment levels drop substantially, inflation spirals, taxes surge, the national debt balloons, and the value of the Canadian dollar depreciates,” said Michael Marzolini, chairman of Pollara Strategic Insights in a news statement.

But most of the 2,670 polled feel it won’t impact them, said Mr. Marzolini, saying the poll findings represented a “perplexing disconnect.”

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“As the dramatic changes to the global economy in the latter part of 2008 demonstrate, the severity and duration of the recession are very difficult to predict,” it said. However, it agrees with most analysts that the domestic economy, which managed to skirt recession through the first three-quarters of the year, “most certainly tipped into a recession in the final quarter of 2008 that will extend into the first half of 2009.”

It projects that the Canadian economy will contract by 0.6% next year from this year, following only marginal 0.7% growth this year.

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