Numbers in work falls for first time in eight years

Official figures released yesterday showed that the number of people in work had fallen for the first time in eight years, putting a cloud over the Government's economic record ahead of the general election.

Official figures released yesterday showed that the number of people in work had fallen for the first time in eight years, putting a cloud over the Government's economic record ahead of the general election.

Fears of a turning point in the labour market were compounded by data showing the total number of jobless rose for the second month in a row. Government statisticians said only that growth in the labour market had "levelled off".

National Statistics said employment fell by 25,000 people to 27.96 million in the quarter to November. This was the first fall since April 1993. The rate also fell, by 0.2 percentage points to 74.5 per cent. The International Labour Organisation measure of unemployment rose by 11,000 to 1.58m, the second consecutive rise.

But the gloom was tempered by a fall in the number of people claiming benefit to a fresh 25-year low and the buoyant level of pay awards. Excluding bonuses, basic pay levels rose by 4.6 per cent in the year to November, which is above the Bank of England's "pain barrier" of 4.5 per cent.

The fall in the claimant count, by 2,600 to 1.042 million, was less than hoped for in the City. It is now almost inconceivable that unemployment will fall below the magic million mark before a spring election, as ministers had hoped.

Last night the Government announced a new drive to combat long-term unemployment in which companies will be paid "golden hellos" of up to £2,310 to take on jobless people from deprived areas. The Recruit will pay employers £1,200 "upfront" for hiring an 18-24-year-old and another £1,100 if they are still in the post after 13 weeks. For over-25s, the rates will be £1,000 and £950 respectively. Firms now get up to £75 a week for six months, a total of up to £1,820, so the new payments will be more generous and quicker.

The unemployment claimant count is falling at just 700 a month, compared to 19,000 a month in September. The number of job vacancies rose to 374,500 - the highest level since records began in 1980.

Yesterday's jobless figures prompted calls for an interest rate cut by the Bank. The Confederation of British Industry warned of further manufacturing job losses incoming months while John Monks, general secretary of the Trades Union Congress, said: "The labour market is clearly weakening."

But the City was alarmed by a rise in the level of earnings, fearing a surge in inflation. The pound rose against the dollar on fears rising wages would discourage the Bank from cutting rates. "There was nothing in that data to support the idea of a rate cut," said one economist.