Manufacturing loses 122,000 jobs as unemployment falls to 20-year low

The Government yesterday sought to soothe concerns over the steady reduction in manufacturing jobs, instead choosing to highlight the growth in the numbers of artists and sports referees.

The manufacturing sector shed 122,000 jobs in the year to January - a 3 per cent fall - taking the total perilously close to the crucial four million mark, according to figures published yesterday.

As fears grow over the future of the car maker, Rover, Tessa Jowell, the Employment minister, acknowledged that some economic sectors were losing jobs despite a booming labour market.

Ms Jowell said: "There has been a fall in the number of jobs in some sectors, but the increase in employment in other sectors has more than made up for this."

The minister said this was reflected across a range of sectors. "The number of artists and graphic designers, for example, went up by 10 per cent to over 125,000," she said. "The number involved in professional sport - both participants and officials - went up 10 per cent to more than 43,000."

Sir Ken Jackson, general secretary of the engineers' union AEEU, said that gains in employment should not be at the expense of manufacturing. "The problems at Rover highlight how important it is to ensure that Britain has a manufacturing base creating wealth."

Sudhir Junankar, senior economist at the Confederation of British Industry, said the UK's skills base was under threat. "If people are laid off by a certain well-known car company, it may be difficult to transfer their skills to become an artist or graphic designer."

Martin Temple, the director general of the Engineering Employers' Federation, added: "The loss of highly skilled jobs, many of which will not be recovered, continues to be enforced by the strong pound and the dash to encourage the dot.coms."

Unemployment fell to a new 20-year low, while the total number of people in work rose to another all-time high. Overall, another 83,000 people joined the workforce over the three months to January. The number out of work and claiming benefit fell by 6,700 to 1.154 million, the lowest since January 1980.

The figures - combined with the steepest rise in average earnings reported for more than seven years - will help to stoke up fears that an overheating labour market will force interest rates higher.

A Treasury official said: "Responsibility in wage bargaining across all sectors is necessary if we are to avoid higher interest rates and fewer jobs in future."

Incomes rose by 5.9 per cent in the three months to January compared with a year ago, up from December's 5.5 per cent and ahead of forecasts of a 5.7 per cent rise. This is the highest level since July 1992, the Office for National Statistics said.

The massive rise came despite a slowdown in growth of bonus payments, indicating that pay is rising across the economy and not just in bonus-driven jobs such as banking and stockbroking.

Growth in bonuses fell sharply from 2.6 per cent to 1.7 per cent, while pay growth excluding bonuses surged to 4.8 per cent from 3.7 per cent, the largest month-on-month rise since detailed records began in 1997.

The ONS said that much of the rise was related to the millennium period. Factors included "stand-by" allowances in utilities, overtime payments to manufacturing workers after an extended factory shutdown, and overtime for police and health workers.

Dharshini David, an economist at HSBC, said: "What was worrying was that, excluding bonuses, earnings growth provided the upward pressure this month."