* TSX falls 0.87 percent to 11,196.06
* Down 4.4 pct for the week
* Gold stocks dive after Thursday's bullion selloff
* U.S. payrolls fall for the first time this year (Adds details)
By Ka Yan Ng
TORONTO, July 2 (Reuters) - Toronto's main stock market index hit its lowest level in more than four months on Friday as resource issues, particularly gold miners, stumbled heavily.
Gold shares were reeling after bullion prices were hit hard on Thursday, when Canadian markets were closed. The index's materials sector, which includes golds, was down more than 3 percent.
Gold-mining issues were the main drag on the index even though bullion prices rebounded a bit on Friday. Thursday's fall was triggered by heavy selling by funds trying to cover losses in other markets.
"The gold stocks are unfortunately catching up to that decline in gold price from yesterday, which is why we're seeing really large drops in some of the major gold producers," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver
Mining issues failed to get a lift from news that Australia dumped its proposed "super profits" tax on the sector in favor of a lower resource rent tax.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended down 98.36 points, or 0.87 percent, at 11,196.06. The decline gave the index a weak start to the second half of the year after losing more than 6 percent in the second quarter, the vast chunk in the past few weeks.
It was off 4.4 percent for the week.
Half of the index's 10 sectors were lower, including its three biggest groups: financials, materials, and oil and gas. Other key decliners included Bank of Nova Scotia (BNS.TO), down 0.43 percent at C$48.35, and Canadian Natural Resources (CNQ.TO) down 1.1 percent at C$34.94.
A report that showed U.S. employment fell in June, the first monthly drop this year, added to worries that the global economic recovery was failing to gain traction.[ID:nN01165161]
"You're beginning to see a significant amount of talk about the risk of a double dip recession. I think it's early days for it here," Picardo said.
$1=$1.06 Canadian Reporting by Ka Yan Ng; editing by Peter Galloway