Page last updated at 15:33 GMT, Wednesday, 16 April 2008 16:33 UK

UK unemployment falls by 39,000

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Unemployment has fallen despite the turmoil in credit markets

UK unemployment fell by 39,000 to 1.61 million in the three months to the end of February, according to the Office for National Statistics (ONS).

The ONS said the employment total hit 29.5 million in the quarter, the highest since records began in 1971.

The number claiming jobseeker's allowance in March fell by 1,200 to 794,300, the lowest total since 1975.

However, some analysts noted that there were signs that the UK job market could be weakening.

The ONS said the number of people claiming jobseeker's allowance in February rose by 600, instead of a previously reported fall of 2,800. This was the first rise in this total since September 2006.

"Overall, the labour market remains in fairly good health - but the unambiguous robustness seen just a few months ago is starting to fade," said Vicky Redwood, an economist at Capital Economics.

The manufacturing sector continued to suffer, with 27,000 jobs lost in the three months to February, taking employment in the sector to the lowest since records began in 1978.

But elsewhere, the picture was brighter as the quarter saw the fewest redundancies since 1995 and the number of job vacancies rose strongly.

"Even allowing for lags between output, jobs and unemployment the UK labour market is still behaving as though the economy were chugging along very nicely rather than on the verge of a significant slowdown," said John Philpott, chief economist at the Chartered Institute of Personnel and Development.

Inflation challenge

The ONS said average earnings grew 3.7% in the year to February, slightly lower than the revised 3.9% increase in January.

However, stripping out the effect of bonuses, earnings growth edged up to 3.8% from 3.7% in January.

Basic living costs, including petrol, food and mortgage repayment rates have all been marching higher, and analysts monitor wage increases to see if they are stoking inflation.

The Bank of England is faced with the challenge of containing inflation, which is above the government's target of 2%, and keeping the UK economy on a stable growth path.

Earlier this month, the International Monetary Fund predicted that the UK economy would grow by 1.6% in both 2008 and 2009, much slower than the 2% this year and 2.5% in 2009 the Treasury forecast around the time of its March Budget.


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