Improvement in jobless total: Past two months' trend reversed in September, but engineering employers warn of more losses to come

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UNEMPLOYMENT fell by 13,600 in September to 2,908,300, more than reversing the 9,900 increase in the previous two months and tentatively re-establishing the jobless total on a downward path.

David Hunt, Secretary of State for Employment, said Britain was 'bucking the trend' of rising unemployment in Europe. But the Engineering Employers' Federation was much less confident, warning that 60,000 jobs would be shed in the industry in the next 12 months.

The federation said the recovery in engineering output had come to a halt because of the weakness of European export markets, and it was unlikely to pick up again until next spring. The warning was in tune with Wednesday's disappointing factory output figures, showing a retrenchment in manufacturing.

The pound gained ground on the German mark after the unemployment figures were released in the belief that an interest rate cut was less likely. It rose above DM2.4450 in late morning but closed barely changed on the day at DM2.44. The stock market remained convinced that rates were likely to fall, with the FT-SE index of 100 leading shares closing 5.4 higher at 3,086.3.

September's fall in unemployment took the jobless total to its lowest in almost a year, with falls recorded in every region of the country, most notably Yorkshire, Scotland and north-west England. Unemployment has fallen in six of the latest eight months and is now 84,000 below its peak in January. Some 10.3 per cent of the workforce was without a job and claiming benefit, down from 10.4 per cent in each of the previous four months.

The Employment Department said it was difficult to estimate a trend in unemployment but it appeared to be downwards. But City economists were doubtful. 'The best conclusion appears to be that unemployment is roughly stable,' said Michael Saunders, of Salomon Brothers. 'A sustained fall will have to wait until economic recovery becomes entrenched in 1994,' said Robert Lind, of UBS.

September's fall was the result both of a fall in the number of people joining the dole queue and a rise in the number leaving it after adjusting for seasonal changes. Some 376,500 people left the unemployment count in September, the highest for nearly a year.

Unemployment figures are normally erratic during the summer and early autumn as school leavers join the count and students leave it. Changes in staying-on rates have made adjustment for these seasonal effects increasingly difficult, adding further uncertainty to the trend.

The number of people employed in manufacturing fell by 24,000 in August to a record low of 4,177,000. This was the largest fall so far this year, but the series has proved erratic and prone to substantial revisions. Jobs were lost in energy and water supply for the eleventh month in succession.

Job-shedding was particularly severe late last year. Unemployment later fell, but did so because of a fall in the supply of people willing and able to work rather than a rise in the number of people employed.

The number of hours lost in short-time working fell to a 20-year low of 190,000 in September, suggesting that companies may be laying off some employees and working those that remain harder.

The number of vacancies notified to Jobcentres - about a third of the total - fell by 700 in September to 127,300. New vacancies notified rose to a three-year high. The number of vacancies filled also rose slightly.