Stock markets were mixed Friday after a better-than-expected jobless report in the United States.

The U.S. Labor Department said unemployment rate dropped to 5.5% in February. The report showed unexpected strength and capped a week of indications that the U.S. economy is getting stronger.

At midday the Toronto Stock Exchange 300 is down five points at 7,953.

Canada’s unemployment rate held steady at 7.9% in February due to losses in part-time jobs, Statistics Canada reported Friday. And Statistics Canada said the economy added 16,000 full-time jobs last month.

In other economic statistics, Canadian housing starts in February fell 12.3% from January,

Overall, seven of the TSE’s 14 sub-indexes are ahead. Paper and forest products are up more than 1% on reports that a Canadian export tax may resolve the lumber dispute with the U.S.

Abitibi-Consolidated and Domtar are both enjoying gains on the news.

The tech-heavy industrial products sub-index is also moving higher. Nortel Networks and Celestica are both posting gains.

Air Canada is recalling hundreds of laid-off workers after announcing it flew 2.9 % more revenue passenger miles last month than in February 2001. Its shares areup 19¢ to $5.69.

Hudson’s Bay posting gains after reporting revenues at the Bay and Zellers chains rose in the fourth quarter, although earnings dropped because of price discounting.

The transportation sector is the day’s big loser. It’s down almost 2% largely on a decline in CNR.

The golds are also down, continuing yesterday decline. Barrick Gold and Goldcorp are both off yesterday’s close.

In New York, blue-chips were off their best levels of the session, but tech stocks were still flying high at midday Friday. It seems investors are taking thesurprise decline in U.S. unemployment as further evidence an economic recovery

At midday, the Dow Jones industrial average is up 88 points to 10,613. The Nasdaq was is 49 points at 1,931, and the S&P 500 is up nine points at 1,167.

The S&P/CDNX Composite Index is down 10 points to 1,159. Cap Alliance Grp is the most active issue up 10% to 32¢ on a volume of 1,337,500 shares.