UPDATE 2-Canada's Flaherty sees job market weakness

* Sees continued weakness in job market

* Signs of economic stabilization

* No G7 huddle on sidelines of G20 meeting (Adds details, changes dateline to Ottawa)

By Louise Egan

OTTAWA, Nov 5 (Reuters) - Canadian Finance Minister Jim Flaherty said on Thursday he expects to see weakness in the job market until a solid economic recovery takes hold, although he does see employment gains in some sectors.

"There are some encouraging signs in the construction area .... but overall I continue to expect some weakness in the job numbers," he told reporters in Ottawa.

"They may vary from month to month, but we need to have a clear entrenched economic recovery and then the job numbers will have to catch up with that, as businesses start to reinvest."

The finance minister said he had not yet seen job data due out on Friday that is expected to show the Canadian economy added 10,000 jobs in October. [ID:nN04446691]

When asked whether he thought the economy was in a recovery phase now, he characterized it as a period of stabilization.

"There is some good evidence and some signs of consumer confidence in automobile sales, in construction ... This is a slow, modest recovery that we hope to see developing in 2010," he said.

As Flaherty prepares for a meeting of G20 finance ministers and central bankers in St. Andrews, Scotland this weekend, he repeated his concerns about moral hazard in the banking system.

He said Canada is opposed to discriminating between institutions that are deemed "too big to fail" and others and at the very least is pushing for banks themselves to bear the costs of their own failure, rather than taxpayers.

"We are conscious of that danger of some institutions feeling that they could act without reproach," he said.

He said the G20 policy makers would also discuss how to finance climate change and coordinate exit strategies from the stimulus policies implemented during the crisis.

He said he did not expect the Group of Seven industrialized nations to meet along the sidelines of the G20 meeting.

Flaherty earlier said he expected the G20 to discuss foreign exchange concerns, although sources in other countries have said the issue is not on the agenda. Normally, currencies are discussed in the smaller G7. (Editing by Jeffrey Hodgson)