Britain's strong labour market is beginning to show signs that it may be feeling the first effects of the slowdown that is blighting other areas of the economy.

Figures revealed today showed that the Office for National Statistics (ONS) had revised its jobseekers allowance figure from a 2,800 fall to a 600 rise. These figures are taken as an early indicator of trends.

The claimant figure for March was given today as a 1,200 decline to the lowest level since 1975, but this will be subject of revision when the ONS reports April's statistics next month.

Vicky Redwood, UK economist at Capital Economics, said: "The labour market remains in fairly good health, but the unambiguous robustness seen just a few months ago is starting to fade.”

In the three months to February, the employment rate rose 0.2 per cent to 74.9 per cent — the highest since records began in 1971 — compared to the previous quarter and a 0.6 per rise on the same period a year ago. During the same period UK unemployment fell by 39,000 to 1.61 million.

While unemployment fell, the manufacturing sector continued to lose jobs, with the total number of employed falling 27,000 in the three months to February to a total of 2.90 million, the lowest since records began in 1978.

According to the ONS, average earnings increased by 3.7 per cent in three months to February, down from a 3.9 per cent increase in the previous period.

Earning figures are welcome news for the Bank of England as it showed rising inflation within the wider economy is not yet feeding through into wages.

However, annual average earnings growth excluding bonuses picked up from 3.6 per cent in January to 4 per cent in February, the largest increase since November 2006. But this is still comfortably below the 4.5 per cent level that the Bank of England deems consistent with its 2.0 per cent CPI inflation target

David Kern, Economic Adviser to the British Chambers of Commerce, said: “There is no room for complacency. The problems in the financial system and in the housing market pose very real threats and it is vitally important that the wealth creating business sector is not harmed by these difficulties.

“In spite of the figures published today, we continue to believe there is a strong case for a modest cut in interest rates to 4.75 per cent in May. Without a cut in interest rates there is a serious risk that confidence will decline with significant implications for the economy.”

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