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Workers stand on the foundation at a condominium construction project in Toronto.Brent Lewin/Bloomberg

Canada's unemployment rate rose to 7.1 per cent in September, the highest level in more than a year, as more Canadians tried to find work amid weak economic conditions.

The last jobs report before a Bank of Canada interest rate decision and the federal election in mid-October painted a murky picture of the country's labour market.

The economy gained 12,100 jobs in September, higher than analyst forecasts of 10,000. But the data also showed job creation lagged Canada's growing work force. More than 1.36 million people were out of work last month, the highest number of unemployed Canadians in nearly two years.

The jobless rate unexpectedly rose to 7.1 per cent from 7 per cent, a level not seen since February of last year, according to data released by Statistics Canada.

"Not good," Bank of Montreal's chief economist Douglas Porter said in a research note.

Economic data have taken on greater significance ahead of the election on Oct. 19, with the Liberals and NDP accusing the Conservatives of mismanaging the nation's economy.

A plunge in oil prices has contributed to the country's weak economic output and tepid job growth.

In September, public and private employers shed 18,600 jobs while self-employment jumped by 30,800 – a potentially worrying development.

"The increase in self-employment can sometimes be concerning as it can be viewed as a transition between employed and unemployed, where someone losing his job tries to make it as a consultant or starting a small business," said Charles St-Arnaud, executive director of economics at Nomura International PLC.

Over the past year, full-time employment has increased 1.4 per cent, part time work dipped 1.2 per cent and self-employment rose 2.5 per cent. Part-time jobs jumped by 74,000 last month while full-time work fell by 62,000.

The weak job growth comes after Canada dipped into a mild recession in the first half of this year, giving the Liberals and NDP ammunition to attack Conservative Leader Stephen Harper's economic leadership.

The latest jobs report "has to be disappointing for the Harper campaign," said Sherry Cooper, chief economist with Dominion Lending Centres.

Although the energy industry has laid off thousands of workers in response to the plunge in oil prices, data showed that the natural resources sector only lost 2,600 jobs. Alberta, home to the big oil companies, created 12,000 jobs in September. British Columbia also added 12,000 while Ontario lost 34,000.

"Energy producers are still in the process of slashing investment plans, so the full extent of the oil shock may only be just beginning," David Madani, an economist with Capital Economics, said in a research note.

The education sector lost 51,300 jobs at the beginning of the school year. Meanwhile, health care and information services, such as telecommunications, created nearly 50,000.

The Bank of Canada has cut rates twice this year in a bid to stimulate the economy. Its next rate decision is due Oct. 21.

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