Rise in jobless figures is 'embarrassing' for Labour

Unemployment in Britain saw its biggest jump in almost two years last month, a blow for Tony Blair three weeks before the general election.

Figures released yesterday ­ the day the Labour Party launched its election manifesto ­ showed the number of people claiming unemployment benefit surged unexpectedly by 11,000. The jobless rate rose to 2.7 per cent from 2.6 per cent. With February's small drop revised to a rise of 3,900, the figures marked the first back-to-back monthly rises since October.

On the internationally recognised ILO measure, unemployment rose by 29,000 to 1.43 million in the three months to February, a rate of 4.8 per cent.

Peter Dixon, an economist at Commerzbank, said: "It's a bit embarrassing for the Government. The party can justifiably point to a good economic performance over the past eight years, but it's just bad luck that [the unemployment figures] came out on the day of Labour's manifesto."

Mr Blair has come under increasing pressure to safeguard jobs, particularly in the manufacturing sector where almost 1 million jobs have been lost since Labour took power in 1997. MG Rover, Britain's last major car maker, collapsed last week and shut down production at its Longbridge factory, which employs about 6,000 people. Thousands more jobs are threatened if the administrators cannot find a buyer for the stricken company.

Manufacturing jobs hit a record low of 3.23 million after the loss of 85,000 positions in the quarter to February, compared with the figure a year ago.

But it was not all bad news. The number of employed people rose by 148,000 to 28.64 million in the three months to February, the highest since 1971. That took Britain's rate of employment to 75 per cent, hitting the Government's target for the first time. In its manifesto, Labour has pledged to raise the rate to 80 per cent. Some of the rise can be explained by previously inactive people being listed as unemployed. The number of economically inactive people fell by 79,000 in the quarter to February. The rate dropped to 21.2 per cent.

Average pay growth shot up to 4.7 per cent in the three months to February from a year ago, from 4.4 per cent in the previous quarter, mainly because of big City bonuses. Excluding bonuses, pay growth eased to 4.3 per cent from 4.4 per cent. Many analysts thought the pay data, combined with rising unemployment, slightly reduced the chances of another interest rate rise. But a lot depends on next week's retail sales and GDP figures.

Vince Cable, the Liberal Democrat's Treasury spokesman, said the rise in unemployment "will cause embarrassment for Labour on the day they launch their manifesto and trumpet their economic record".