Economists expect the economy will shed 50,000 jobs following the 82,600 lost the month prior. The unemployment rate is forecast to reach 8.0% from 7.7% - its highest level in almost eight years.

"The storm sweeping Canada's labour markets is not going away just yet," said Krishen Rangasamy, economist at CIBC World Markets.

With business bankruptcies soaring, Rangasamy called the first quarter of 2009 one of the worst in generations for Canadian job losses and economic growth.

Jacqui Douglas, currency strategist with TD Securities, said the Canadian labour market is still only one-half or even one-quarter through the job loss cycle.

Douglas wasn't sure whether or not currency markets would react following the release. She said in the past, dismal employment reports have caused an immediate rally in the U.S. dollar against the loonie. However, lately it seems other factors such as equities are driving the USD/CAD cross, she said.

On the other hand, she added, "If we do indeed see a worse job number than expected, the burst in USD/CAD will probably provide a good opportunity to sell."

TD Securities rates strategist Eric Lascelles said a worse-than-expected report would not necessarily spark a sustained rally in Canadian bonds, because of overpowering U.S. factors. Traders are anticipating more supply in U.S. bonds, he said, and the U.S. trade balance report Thursday could be stronger than forecasts.

Rangasamy said with a terrible report already priced in, markets probably won't react much to the release.

As for the Bank of Canada, Rangasamy said, a dismal labour report means the bank is likely to adopt quantitative easing methods soon, seeing as the central bank has no "interest rate bullets" left to fire.

However, in comments last Wednesday, Bank of Canada Governor Mark Carney downplayed any notions the Bank would adopt quantitative easing at the next meeting in April, and said to expect only a framework for such a program.

In the coming months, most economists don't forecast any improvement in the Canadian labour market, but expect conditions to worsen.

However, economists at Scotiabank said things could pick up at year-end when the Canadian government's fiscal stimulus programs begin to trickle through to the real economy, especially within the construction sector.

Canada's labour force survey will be released by Statistics Canada at 7 a.m. EDT Thursday morning.

By Megan Ainscow, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Ernest Hoffman, This email address is being protected from spam bots, you need Javascript enabled to view it

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