Surging demand and prices for lumber — as the U.S. housing market finally recovers and as exports to China expand — are giving a boost to Canada’s beleaguered forestry sector.

“Demand has picked up, and it doesn’t take much pickup to create a quite tight market,” said Patricia Mohr, a Scotiabank economist who tracks the prices of lumber and related products to compile the firm’s monthly Commodity Price Index.

The bounce-back comes after the permanent closure of about 140 major sawmills in the U.S. and Canada — closures that represented about an 11% decline in capacity for the industry.

Ms. Mohr expects new sawmills to built in Canada’s west coast province of British Columbia, or shuttered ones to come back online, to accommodate the renewed demand. And that will bring jobs, she said, at sawmills and elsewhere.

“There had been quite a loss of employment, not just at sawmills but also logging contractors, and in the trucking business. A lot of this is going to come back,” Ms. Mohr told Canada Real Time.

In early January, prices for lumber and oriented strand board — a sturdy composite of glued-together wood chips used in roofs and as sub-floors — reached levels not seen since 2005, when the U.S. housing market was at its peak. That year, annualized U.S. housing starts were at 2.05 million units. Compare that with last year’s 954,000 units.

Ms. Mohr said lumber and OSB prices have improved dramatically from levels seen in 2011 and, though they can be very volatile, she expects them to continue moving higher at least until the end of the next year. “It is a multiple-year story of recovery,” she said.

Ms. Mohr said she hasn’t tried to gauge how many jobs a recovered lumber industry could create. But she did say employment needs are already top-of-mind among some in the industry.

“One of the big sources of worry for the industry is where they are going to find the labor, and what the wage rates are going to be,” she said. One reason for the concern: after the sawmills closed, many skilled workers moved from the lumber-heavy province of British Columbia inland, to the booming oil-and-gas-producing province of Alberta.