Dismay as joblessness rises above 2.5 million

A sharp decline in public sector employment helped push Britain's jobless total over the 2.5 million mark last month. The largest rise in unemployment was among 16- and 17-year- olds, where there was an increase of 19,000 to reach 206,000.

Some 30,000 fewer people worked for local and central government during the third quarter of the year, the Office for National Statistics reported, with the numbers employed by the nationalised banks falling by a further 3,000, taking the total contraction to 33,000 – a first instalment on cuts that will run to 330,000 by 2015.

But, unlike in the earlier part of the year, when job creation was showing very strong trends, the private sector was unable to take up the slack, and total unemployment rose to 2,502,000 or 7.9 per cent. By contrast, unemployment in the three months to September was 2,448,000 – 7.7 per cent.

Employment, including casual work, fell by 33,000 in the three months to October – some 57,000 full-time jobs were lost in the period.

Research exclusive to The Independent reveals that the number of workers in part-time or temporary unemployment because they could not find a permanent job has risen to 1,601,000, an all-time high and up from around 1,357,000 this time last year. This represents further confirmation of an economy that is not delivering the type of jobs that its workers have traditionally expected. It also suggests thatwelfare-to-work programmes initiated by the previous government and this have succeeded in pushing more people into jobs and off benefits.

The labour market appears to have reached a turning point. For the first time since April, there has been both a quarterly fall in the employment rate and a quarterly increase in the unemployment rate.

The inactivity rate – those who have left the labour market and are no longer seeking work – also rose for the first time since the spring. However, the claimant count has dropped marginally on the month: the numbers claiming unemployment benefits fell, albeit marginally – slipping by 1,200 people to 1,462,700. The negligibleimprovement follows routine falls of around 30,000 in the earlier part of the year, and adds to a picture of a slackening in jobs growth.

Set against the picture a year ago, the rebalancing of the UK economy away from the public sector doesappear to be gathering pace; there has been a net creation of 219,000 jobs since 2009, with 296,000 new private sector jobs more than compensating for 77,000 lost posts in the state sector. However both those trends – private job creation and public sector losses – look set to worsen in the near future.

Much now depends on how theeurozone resolves the debt crisisaffecting its member states. EU leaders meet tomorrow and on Friday todecide on a more permanent mechanism to assist troubled countries.

The annual growth rates for pay have increased marginally, to 2.2 per cent, including bonuses.

John Philpott, the chief economist at the Chartered Institute of Personnel and Development, said the rise was "unexpected and disappointing", and 2011 would be "difficult and sombre".