Unemployment unexpectedly rose during April after the number of people claiming jobseekers' allowance rose by 7,200 to 806,300, as the economic slowdown began to feed into the UK labour market.

The rise in figures, which is the largest increase since April 2006, contrasted with economists' expectations that the number unemployment claimants would remain unchanged last month.

The Office for National Statistics (ONS) also disclosed this morning that the number of unemployed people rose by 14,000 in the first quarter of 2008 to 1.61 million compared to the final three months of 2007. In reaction, the pound fell against the dollar, declining from $1.9445 to $1.9423.

The March claimant count has also been revised upwards to show an increase of 3,600 Britons seeking jobseekers' allowance compared to an estimated 1,600 decline, resulting in three consecutive months of rising numbers.

However, on the upside, employment increased by 117,000 in the three months to March on the previous three months to 29.54 million - the highest figure since records began in 1971.

Overall the rate of people out of work remained unchanged at 5.2 per cent during the quarter compared to the previous three months. The rate of redundancies was also stagnant, at 111,000 in the first quarter which is unchanged on the three months to December.

Average earnings increased by slightly more than analysts had forecast but were largely benign despite a spike in inflation which is now at 3 per cent, above the Bank of England's 2 per cent target.

Average earnings, which include bonuses, rose by 4 per cent in the three months to March, up from 3.7 per cent in the three months to February and above analysts’ forecasts for a more modest increase to 3.8 per cent.

Excluding bonuses, earnings growth remained at 3.8 per cent over the same period, in line with expectations.

Howard Archer, chief UK and European economist at Global Insight, said: "The labour market is now showing clear evidence of softening as markedly weaker growth and deteriorating business confidence impact."

He added: "While the earnings data are not that worrying overall for the Bank of England, they do little to revive dwindling hopes that interest rates will be cut again in the near term."

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