"We're not looking for exactly the same size of decline as we saw in July, but we are looking for a decline which puts us a bit off consensus," said Scotiabank economist Karen Cordes.

The consensus estimate among economists is for a gain of 10,000 jobs and unemployment to edge up to 6.2%. But Cordes said her bank is seeing a number of warning signs.

"We still see signs of weakness everywhere," she said pointing to the recent declines in business investment, the housing sector, and consumer spending growth. Cordes said Scotiabank's forecast is for job losses in August to come in at 5,000 and for unemployment to edge up to 6.2%.

Cordes said she expects weakness to continue in manufacturing and to show up in other sectors, such as construction.

In contrast, Laurentian Bank economist Sebastian Lavoie said he expects a snap back in employment after July's disappointing figure, which he characterized as a statistical aberration.

"Although the economy is entering a period of stagnation I don't believe we're in a deep recession like in the 1990s," he said. Lavoie is forecasting a 20,000 job gain for August and an unemployment rate of 6.2%.

Lavoie said the cutback in business spending highlighted in the second quarter GDP report is reflective of the uncertain economic conditions, but he said the strong profitability among Canadian businesses is a positive sign and one that contrasts with the decline in profitability seen in the U.S.

"There's no reason to start slashing jobs across the board," he said.

Lavoie said he didn't expect the jobs report to have much of an impact on markets unless the figure surprises to the downside.

HSBC economist Stewart Hall agreed, saying the Bank of Canada's decision to hold the interest rate at 3% this week suggested a fair degree of tolerance for softness in the economic data.

"The statement released along with the policy announcement suggested they're fairly well dug in on the sidelines and have done as much as they are willing to do on rates to combat market dislocation and economic softness," he said.

Although he said the job number tends to resonate both on currency and fixed income markets he said the BOC's stance and the fact U.S. nonfarm payroll numbers are due out Friday will have a limited market reaction. Hall said it would take a "massive print" similar in size to July's figures either above or below expectations to get the market moving on the labour force number.

Hall predicted a positive print of 15,000 new jobs in August and said the previous month's job loss was a result of the unwinding of a manufacturing job "boomlet" in May following the conclusion of a strike at a U.S. parts supplier, and the loss of nearly 30,000 education-related jobs at the end of the school year.

"Neither event is expected to repeat," he said.

By Sean McKibbon, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it

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