Canadian unemployment rate hits 1-1/2-year high ahead of election

By Leah Schnurr OTTAWA (Reuters) - Canada added jobs in September but the unemployment rate rose to its highest level since February 2014, adding to a string of woes for Prime Minister Stephen Harper in the final days of a neck-and-neck race to the federal election. The employment numbers, the last major piece of economic data before the Oct. 19 ballot, showed job creation failed to keep up with the growing workforce. Harper's ruling Conservatives have campaigned on their economic management in turbulent times, but a rise in the unemployment rate gave opponents a chance to attack. "We have today 300,000 more unemployed than there were when the crisis hit in 2008. Stephen Harper has the worst job creation record of any prime minister since the second world war. You deserve better," Thomas Mulcair, leader of the left-leaning New Democrats, said during a campaign stop in Montreal. While Harper has pointed to the creation of 1.3 million new jobs since the depth of the financial crisis, the number of unemployed has also climbed on his watch. The jobs report showed Canada added 12,100 jobs in September, surpassing economists' forecast for an increase of 10,000 jobs, but the gains were all in part-time work, while full-time employment plunged. The unemployment rate rose to 7.1 percent, the highest since February 2014 and defying expectations for a drop. The participation rate held at 65.9 percent, while the size of the labor force edged up. "If I had to choose one indicator in this entire report to summarize it, I would probably focus on the unemployment rate, which has been slowly, but surely, grinding higher ... consistent with an economy that's growing below potential," said Doug Porter, chief economist at BMO Capital Markets. Canada was in a mild recession in the first half of 2015. Economists and policymakers expect growth resumed in the third quarter, a view supported by recent data. The jobs report is also the last key data release ahead of an interest rate decision by the Bank of Canada on Oct 21. After two interest rate cuts this year, the bank is expected to hold its main policy rate at 0.50 percent. The jobs report did not alter that view. The Canadian dollar pared some gains against the greenback immediately after the report was released, though it remained firmer against the U.S. dollar as oil prices rose. [CAD/] (Additional reporting by Alastair Sharp in Toronto; Editing by Jeffrey Hodgson, Bernadette Baum and David Gregorio)