But economists warned that jobless totals would almost certainly rise again in coming months, and said the figures should be no barrier to another UK interest-rate cut.
The number of people claiming benefit tumbled by 14,000 in December to 1.31 million, the lowest level since June 1980. Unemployment also fell on the Government's preferred ILO measure, a more broadly based estimate of the jobless total. A sharp fall in the number of women out of work helped to take the ILO measure down by 26,000 to 1.79 million between September and November.
Employment reached record levels, said the Office for National Statistics, with services industries such as banking and finance leading job creation. But jobs continued to be lost in manufacturing: in the three months to November the number of manufacturing jobs was 1.5 per cent lower than in the same period in 1997, according to official figures.
City analysts, who had expected a rise in both measures of unemployment, called the fall in the jobless total a statistical blip. Some said mild December weather may have boosted the construction industry. Others attributed the fall in unemployment to the Government's welfare-to-work programme.
Sudhir Junankhar, associate director of economic analysis at the Confederation of British Industry, said: "The slight falls in underlying unemployment are welcome but seem unlikely to continue, given other evidence of an increasing slowdown in the economy. Further interest-rate cuts are still needed to stave off the danger of an outright recession."
Ken Wattret at Paribas said: "The real economy tells us that things will be pretty nasty in the first and second quarters. From the perspective of interest rates, nothing has really changed."
Dharshini David at HSBC said: "Surveys indicate that employment will fall and unemployment rise over the coming months. Services job creation in particular is likely to tail off."Reuse content