Unemployment fell for the sixteenth consecutive month in January, according to official figures, but still failed to ease fears of economists, who feel the trend could quickly reverse.

The number of people claiming unemployment benefit fell by 10,800 last month, more than twice the amount expected by analysts. Employment rose 175,000 in the three months to December, the biggest increase in more than a decade.

The internationally recognised International Labour Organization (ILO) measure of unemployment also showed a decrease. The number of people seeking work fell to 5.2 per cent in the last quarter of last year, down from 5.4 per cent in the previous quarter.

But earnings growth weakened in the last quarter of 2007. The Office for National Statistics (ONS) said that earnings increased 3.8 per cent in the period, easing from 4 per cent in the three months to November.

But economists gave warning that the employment figures were little cause for celebration. Karen Ward, of HSBC, said: "The employment numbers can be a lagged indicator understating the true state of the economy, as well as how central bankers and interest rates react."

Although the overall number of people seeking employment fell in the last quarter, in some sectors there has been an increase in the number of people losing their jobs. Redundancies in hotels, restaurants and finance and business services have risen by 10.6 per cent and 11.5 per cent, respectively. In contrast, manufacturing redundancies fell by 27.8 per cent.

John Philpott, chief economist for the Chartered Institute of Personnel and Development, said: “What is surprising is that the ONS figures show no sign whatsoever of the softening in demand for staff identified by various recent independent employer surveys."

“Let’s hope for the best — but don’t be too surprised if things soon start to take a turn for the worse."

Vicky Redwood, UK economist for Capital Economics, said: "Unemployment should be rising before too long. Indeed, we think that unemployment could rise by some 700,000 by the end of next year, taking the ILO unemployment rate to 7.5 per cent from its current 5.2 per cent."

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