ATHENS, Greece (AP) -- Greece's unemployment rate rose to 26 percent in September, highlighting the country's economic plight as it heads toward a sixth year of recession.

The Greek Statistical Authority said Thursday that 1.295 million people were recorded as being unemployed in September, pushing up the jobless rate from 25.3 the previous month and 18.9 percent a year earlier.

The number of people employed stood at 3,695,053, while another 3,373,692 were listed as financially inactive, according to a statement with September data.

Greek unemployment has surged as a result of harsh austerity measures imposed in return for international rescue loans. The conservative-led government is finalizing a major tax reform bill, demanded by rescue creditors as one of several conditions for continued payments. It has promised to try and stem the country's punishing recession, but last month introduced another round of austerity measures.

Earlier this week, the Bank of Greece forecast that the economy would contract by more than 6 percent this year, and by a further 4-4.5 percent next year.

The largest labor union, the GSEE, has predicted the jobless rate will reach 29 percent next year.

"According to our calculations, the recession next year will be between 5 and 5.5 percent ... The money being taken out of the economy due to higher (taxes) is driving the recession," Savvas Rombolis, head of labor research at the union, told private Skai radio.

"So more businesses will close, more people will lose their jobs, and fewer graduates will find work."

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