OTTAWA –

Bank of Canada Governor Stephen Poloz angered many young job seekers last week by suggesting those still living in parents' basements should consider unpaid work. The good news is, they might not have to.

Young people are on pace for the biggest annual jobs increase since 2002, Statistics Canada data show. In September and October, employment in the youth category — 15 to 24 — increased by a combined 47,400, the second-highest two-month total since 2006 and about 40 percent of the total 117,200 net new jobs across all categories.

"They're definitely getting out of the basement," said John Clinkard, chief economist at Deutsche Bank Canada in Toronto. "When you create 100,000 jobs in two months, you use up some slack. As demand increases you'll start to absorb these less-skilled workers."

The improvement in youth employment is part of a broader trend that is making it more difficult for Poloz to say there is "material slack" in the jobs market, part of his base case for keeping borrowing costs near historically low levels. National unemployment fell to 6.5 percent in October, the lowest in six years, Statistics Canada said Nov. 7.

Poloz said last week Canada's economy may need prolonged monetary stimulus, and "discouraged worker effects" point to a job market that's weaker than the unemployment rate would suggest. He also predicted it would take two years for the economy to return to full output. The recent jobs upturn may erode his case.

"I wonder whether he can remain this dovish for much longer," said Doug Porter, chief economist at BMO Capital Markets in Toronto. "If we see real improvement in the broader job market, like night follows day, we will see improvement in the youth labor market as well, and that's effectively what we have seen over the last year."

Youth have accounted for 35 percent of the 201,000 jobs created so far in 2014 in Canada, said Matthieu Arseneau, senior economist at National Bank of Canada in Montreal, who called it "a positive development as the unemployment rate for this group has room to improve further."

Labor conditions point to "material slack" in the economy, Poloz said Nov. 3 in Toronto. He estimated there are about 200,000 young people who want to work or work more. Bank of Canada Senior Deputy Governor Carolyn Wilkins is scheduled to speak Thursday at Wilfrid Laurier University in Waterloo, Ontario, and may elaborate on the bank's view.

"Having something unpaid on your CV is very worth it, because that's the one thing you can do to counteract this scarring effect," Poloz said to reporters in Toronto, laying out his advice for young job seekers. "Get some real-life experience even though you're discouraged, even if it's for free. If your parents are letting you live in the basement, you might as well go out and do something for free to put the experience on your CV."

The comments became front-page news and sparked criticism from youth groups, labor unions and federal lawmakers including Employment Minister Jason Kenney, who said the governor's focus should be on boosting paid employment.

Nathan Pacheco, 27, lives in his parents' basement in the south end of Ottawa. He's taking part-time courses at Carleton University to finish a history degree, while working two jobs — one at a campus coffee shop, the other at a community center.

"I understand what he was trying to say," Pacheco said, when asked by a Bloomberg reporter what he thought of Poloz's comments. "You get experience this way and employers aren't scared to take you on because you're not a cost to them. But is that realistic? That's kind of detached from reality."

Pacheco wants to work as a teacher and says he's discouraged by employment prospects in the field in Canada. He's considering whether to apply to teachers college or travel abroad to teach English as a second language.

"If you don't have parents that can support you and help you through those rough periods, you can't wait out for better opportunities," Pacheco said.

The Bank of Canada media department didn't immediately return a request for comment. Most government offices in Canada were closed Tuesday for Remembrance Day.

To be sure, pockets of weakness remain in the youth job market. The participation rate fell to 64.7 percent in October, from 65.2 percent the month before and below the national rate of 66 percent, which was the lowest since 2001. Over the past year, full-time employment fell 0.4 percent while part-time jobs rose 3.8 percent.

"It wasn't a helping of good news" for young workers, Peter Buchanan, an economist at CIBC World Markets, said by telephone from Toronto after the Nov. 7 report, adding companies may keep hiring the available experienced workers ahead of younger ones.

Bank of Nova Scotia said last week it would cut 1,500 jobs, the most of any Canadian lender in a decade, with two-thirds of those positions in Canada, and Montreal-based SNC-Lavalin Group Inc. said it's eliminating 4,000 jobs, about a quarter of those in Canada, because of a weak global economy.

Yet youth employment grew 1.6 percent in October from a year earlier, outpacing the 1 percent gain in the broader labor market. The average youth participation rate since 1976 is 66.2 percent, not much higher than the October reading.

Even with the labor-market improvement, Poloz and his fellow policymakers are unlikely to raise interest rates any time soon, economists say. The central bank has held its benchmark overnight rate at 1 percent for more than four years. The next increase won't be until the second half of 2015, according to the median forecast in a Bloomberg News survey of 18 economists.

"The Bank of Canada will likely keep rates on hold for at least another year, even if it means that the economy runs hot," Emanuella Enenajor, senior Canada economist at Bank of America Merrill Lynch in New York, wrote in a research note. "That could create the momentum needed to pull kids out of parents' basements and into the workforce."