City surprised at resilience of jobs market

Britain's labour market is still sucking in workers despite growing evidence manufacturing industry is approaching a meltdown that is infecting other parts of the economy.

Britain's labour market is still sucking in workers despite growing evidence manufacturing industry is approaching a meltdown that is infecting other parts of the economy.

Official figures yesterday showed the number of people in work rose 65,000 in the three months that followed the 11 September terrorist attacks. But the number claiming unemployment benefit climbed for the third month in a row as industrialists continued to reduce their workforce, plunging manufacturing employment to an all-time record low.

More evidence of weakness came from slower growth of average earnings, which pointed to fading inflationary pressure from the jobs market.

Analysts were surprised by the labour market's resilience. "We are all looking for a turnaround in the labour market and there are tentative signs this is happening but they are not convincing," said John Butler, UK economist at HSBC.

"If we had a turnaround in the global economy the UK does not have much slack in its labour market."

National Statistics said employment rose 65,000 over the three months to November. The largest increase was among female part-timers. But official unemployment rose by 15,000 over the same period to 1.522 million. Claimant count unemployment climbed 3,200 – for the third month in a row but by less than expected in the City – to 963,500.

The worst affected sector was manufacturing, as the recent high-profile redundancies translated into a slump in employment, low pay levels and the first fall in productivity for four years. The number of manufacturing jobs fell 146,000 to 3.78 million in the year to November, a record low. Following the jobs cull, the fall in output meant productivity dropped by 0.1 per cent.

This was fed through to pay awards. Manufacturing earnings growth slowed to 2.7 per cent in November, from 4.0 per cent in the previous month and the lowest since records began in 1991. Overall average earnings growth fell to 4.2 per cent, its weakest level for a year.

The Engineering Employers' Federation said there was no inflationary pressure.