The fall in unemployment to the lowest level for three decades may look cause for celebration. But don't break out the champagne. There are clear signs that the UK job market is weakening and predictions for job losses in those sectors most exposed to the credit crunch are mounting by the day.

The bidding for City job losses reached 40,000 this week, which may be too gloomy. But the howls of pain emanating from some retailers suggest that forecasts of 100,000 retail job losses could be on the low side. Don't let Sir Terry Leahy's upbeat comments on Tuesday fool you. Tesco is about the best placed of any big retailer in the country to cope with a slowdown.

The irrepressible Sir Philip Green said last week that conditions in the clothing market were as difficult as he had ever seen and some executives say privately that trading in the past few weeks has fallen off a cliff.

The pain is evident in the latest consumer price figures, which showed retail inflation steady at 2.5 per cent in March. For “core” goods, other than food, drink, tobacco and fuel, prices were down 1.8 per cent, suggesting that retailers were competing hard for dwindling sales. In clothing and footwear, the fall was more than 5 per cent. According to the British Retail Consortium, clothing shops suffered their worst month for eight year in March.

Smaller discount chains look particularly vulnerable. Ethel Austin, a fashion chain with 300 stores that collapsed this week, is unlikely to be the last to find itself in the hands of the administrators. Some of the stores will be bought. But the administrators have already laid off more than 420 of the 2,800 staff.

JJB Sports capped a very gloomy day for the sector by announcing plans to close 72 stores and cut 800 staff.

Private equity investors have been active in the lower end of the retail sector in recent years, and a large number of chains now face refinancing their debt in very hostile capital market conditions.

To make matters worse, consumer confidence is falling just as retail space is rising. No fewer than seven huge new shopping centres are due to open this year, the biggest increase for nearly 20 years. Over the next three to four years, the growth in square footage is expected to be double the recent rate.

When times get tough for retailers, the easiest thing to cut is jobs. Not least because if conditions improve its simple enough to hire again.

For City investment banks it can be a rather more expensive process. Many have painful memories of slashing jobs after the dot-com bubble burst in 2000, then finding it hard to staff up again as the markets bounced back.

This is one reason why the City job losses may not be as bad as some forecasters suggest. Moreover, while there has been a slump in activity in areas such as structured credit and merger advice - and the former at least will never recover - elsewhere banks are still busy.

It is hard to see banks laying off foreign exchange dealers just because they are not securitising mortgages any more.

City firms also have the flexibility, not available to retailers, of slashing bonuses before they cut jobs. This in turn, of course, means that while financial job losses may be small relative to those in retailing, the impact of lower City pay packages on the economy in London could be very severe.

Almost as many jobs could be lost in support services and retailing in the City as go from the banks.

If you sell champagne or roses in Canary Wharf, now may be the time to look for another job.

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