Both key measures of unemployment - the claimant count and the Government's preferred ILO measure - are now rising, raising pressure on the Monetary Policy Committee to cut UK interest rates again.
Dharshini David at HSBC Securities said: "These numbers should help to ease fears of wage pressures and should not impede the MPC from cutting base rates further."
The FTSE 100 index surged 73.3 points to close at 5,630.4 on hopes of cheaper money and on the back of Tuesday's rise on Wall Street. Sterling closed little changed against the German mark at DM2.794.
According to the Office for National Statistics, the claimant count - the number of people claiming benefit - rose by 5,900 in November to 1.33 million. The wider ILO measure of unemployment rose by 16,000 in the three months to October to 1.8 million.
Manufacturing jobs fell 1 per cent in the three months to October, the sharpest fall since December 1993. There was further bad news for jobs in the sector yesterday as British Aerospace announced 300 job losses in Glasgow, and AssiDoman, a paper sack manufacturer, said 90 jobs may go in Dundee.
Despite the rise in jobless totals, employment levels continue to increase, said the ONS. The number of people in work reached a record 27.2 million in the three months to October. This partly reflects job creation in Britain's service sector, a trend illustrated yesterday by the announcement of 750 new jobs in York by CPP, a credit-card protection company.
Most City economists believe the unemployment figures will worsen in the coming months and that job creation in services will slow. Unemployment is a so-called "lagging indicator" of activity - it takes time for falling consumer demand to hit jobs.
A new survey by UPS, the package delivery company, supported analysts' gloomy predictions for jobs. According to UPS, British managers have cut back sharply on recruitment plans for 1999.
Separate ONS figures show that Government borrowing was lower than expected last month. Analysts believe the Treasury will record a healthy budget surplus next year, and this should help the Government meet its fiscal rules, even if growth turns out to be lower than expected in 1999.Reuse content