Unemployment rises at fastest rate since 1990s

The number of people drawing unemployment benefit has risen at its sharpest rate since the recession of the early 1990s, figures revealed yesterday.

The figures, which provide the latest indication of a softening labour market, came a week ahead of Gordon Brown's 10th and possibly final budget. They provide an uncomfortable backdrop for a chancellor who has made the restoration of full employment a key plank of policy and follow news that economic growth in 2005 came in at its lowest since 1992.

The Office for National Statistics said the claimant count measure of unemployment rose by 14,600 in February, more than reversing the 1,100 fall in January. The claimant count has risen for 12 of the past 13 months and stands 102,000 higher than a year ago at 919,700, although that only gives a jobless rate of 2.9%, such has been the extent of the falls in unemployment over the last decade.

The ONS also said the government's preferred labour force survey measure of joblessness - which picks up those who are unemployed but not claiming jobseeker's allowance - showed a rise of 37,000 in the three months to January, taking it to 1.53 million, or 5% of the workforce. Statisticians said the rise in unemployment was almost exclusively among women, although it gave no reason for this. Economists said it could show that job losses in the flagging retail sector are hitting women disproportionately hard.

John Philpott, economist at the Chartered Institute of Personnel and Development, said: "The number of women in work has fallen as the consumer slowdown has adversely affected employment in consumer services sectors, notably the distribution and hotel and restaurant sectors which joined manufacturing in shedding substantial numbers of jobs last year."

The ONS figures showed that employment fell slightly, by 7,000, to 28.8 million. But that remained close to its all-time high and was 178,000 higher than a year ago, mainly due to the increase in the size of the working population.

There was another record high for "economic inactivity" which includes students, the long-term sick and people looking after their families. This rose to just under 8 million, although the ONS cautioned that this was mainly due to a rise in student numbers. Mr Philpott added that the slowdown in the retail sector, which had pushed up unemployment among women, was probably also contributing to the rise in inactivity.

Margaret Hodge, employment minister, said the figures showed that the fundamentals of the labour market remained strong. "Employment is up on the year, vacancies up again this quarter and redundancies at historically low levels."

She acknowledged that the claimant count was up but said latest Department of Work and Pensions figures showed falls in numbers of people claiming other benefits. She pointed in particular to incapacity benefit claimant numbers, which have fallen 58,000 over the past year.

"But we must do more to tackle worklessness and break the cycle of poverty and benefit dependency. That is why we set out proposals in January's green paper to reform the welfare system and give people increased support in return for a greater responsibility to look for work." Not all was doom and gloom as the figures revealed that the number of retired people finding work had risen by 10% over the past year to a record 1.12 million.

The ONS figures also showed little for the Bank of England to worry about in terms of wage inflation. The Bank has been watching carefully for any upward pressure caused by the rising price of oil and gas.

Average earnings growth remained at 3.5% in the three months to January compared with a year earlier. Earnings continued to grow faster in the manufacturing sector than in the service sector even though manufacturers have shed more than 100,000 jobs over the past year, taking employment in the sector to a record low of just over three million.

The monthly house price snapshot from the Royal Institution of Chartered Surveyors powered to its highest level since June 2004. The RICS survey showed a balance of 28% of surveyors - up from 10% the month before - reported house price rises rather than falls. The RICS said: "Buyer confidence has returned to the market with the number of new purchase enquiries rising yet again, despite diminished hopes that interest rates will fall again."