Yes, of course it can; however if you are talking about multitasking in the normal sense the answer is "if you want to do multitasking the '51 is the wrong choice".

Now, however what you want to do is NOT multitasking. You want to implement real time coding for your square wave generator and that is as plain vanilla '51 code as anyone can imagine.

You have two options:
1) If your derivative has a timer 2 use it. T2 can with aoutomatic reload and output pin generate a square wave without the processor even knowing about it.
2) if you only have T0 and T1, convert your code to be interrupt driven.

Erik