Mr Smith said the divide was narrowing in terms of the number of people out of work and claiming benefit.
But a City economist said ministers who ignored the problem would also be guilty of "laziness".
In a speech at a jobs seminar yesterday, Mr Smith criticised a "tendency" among economists to promote the notion of a North-South divide. "Do not believe the lazy presumptions about a North-South divide in the labour market. The truth is regional differences are narrowing not widening."
He said the latest figures showed the gap between the best and worst region had narrowed from 10 percentage points a decade ago to just 5 now, adding that no UK region had a count above 7.5 per cent.
Data published this week showed that the North-east has the highest jobless rate of 7.3 per cent while the rate in the South-east was just 2.4 per cent. "There is in general no shortage of jobs to compete for. Roughly 750,000 new vacancies come up every month and those are, roughly speaking, distributed across the country in rough proportion to the local workforce," he added.
But Steven Bell, chief UK economist at Deutsche Bank, whose report highlighting a divide between the "nodding North and soaring South," came out in May, said his conclusions were based on careful research.
He agreed with Mr Smith that the differences in the labour market had been all but eliminated, but added that on almost every other economic measure the gap was growing. "We have to come this North-South divide view as a result of careful work and the lazy view is to assume that it has gone," said Mr Bell.
"The North-South divide in income, average wages and migration - which are the killers - is widening," he said, adding that the gap made it hard for the Bank of England to set interest rates.
"But he is right about the labour market where the divide is almost absent. This is something that this Government and the previous government can take credit for and it is a major social achievement."
Mr Smith admitted "unacceptable" inequalities did persist. "They affect deprived neighbourhoods where unemployment in the worst-affected wards can rise as high as 20 or 30 per cent," he said. He said the inequalities "badly affected" the ethnic minorities who were up to five times as likely to be unemployed as their white neighbours, regardless of qualifications. It was "one of the Government's highest priorities to tackle them".
Official figures show unemployment in part of Liverpool is 28.3 per cent - the highest in the UK - while in mid-Sussex it is just 1.0 per cent.Reuse content