Benefit claims and unemployment rise

The jobless rate rose in the three months to February, while the number claiming unemployment benefits increased by its sharpest level last month.

In unwelcome news for the government ahead of next month's election, the Office for National Statistics (ONS) reported that the unemployment rate was 4.8%, up 0.1% from the previous quarter.

The number of people looking for work rose by 29,000 in the three months to February, to 1.43 million, almost entirely due to more unemployed women. The claimant count increased by 11,000 last month to 828,700, the biggest jump for almost two years.

Manufacturing continued to suffer as jobs in the sector fell to a record low of 3.23 million after another 85,000 posts were lost in the quarter to February compared with a year earlier.

The news came as families of MG Rover workers went to Downing Street today to campaign against the threatened closure of the Longbridge factory in Birmingham, which would result in the loss of 20,000 jobs.

The implications for interest rates were cloudy. While the increase in the jobless rate indicated a weakening in the labour market, a jump in annual average earnings growth to 4.7% in the quarter pointed to rising inflationary pressure. The figure exceeds the 4.5% level considered consistent with the Bank of England's inflation target.

Further muddying the picture, the number of people in work increased by 148,000 over the quarter, pushing the employment rate to 75%. The last time the rate was higher was in November 1975, while the total hours worked per week - 923.4 million - is the highest since comparable records began in 1971.

Analysts said today's figures were a mixed bag that further confused the near-term interest rate outlook.

"Consequently, we believe that it remains a very close call on whether interest rates will rise in May," said Howard Archer, the chief UK economist at consultancy Global Insight. "Much will depend on the strength of first quarter GDP growth and consumer spending data and survey evidence over the next few weeks."