The number of Britons out of work rose to its highest level in more than 17 years in November, but a slowdown in benefit claims in December provided some hope that the labour market downturn may be flattening off.
The number of people claiming jobless benefit rose by only 1,200 last month after a downwardly revised increase of just 200 in November, much less than analysts' forecast of a rise of 10,000, the Office for National Statistics said on Wednesday.
But the number of people without a job on the wider ILO measure rose by 118,000 in the three months to November to 2.685 million, the highest level since August 1994. The jobless rate ticked up to 8.4 percent of the workforce, its highest since January 1996 and above forecasts for a reading of 8.3 percent.
The politically sensitive number of young people without a job rose to 1.043 million in the three months to November, taking the unemployment rate in the age group of 16-24 year-olds to 22.3 percent.
Employment rose slightly in the three months to November, edging up to 29.119 million.
The government has been banking on private companies to create enough jobs to make up for the some 700,000 jobs it will cut in the public sector as part of its austerity programme, aimed at erasing the country's huge budget deficit over the next 5 years.
However, while the slowdown in benefit claims and the rise in employment will provide some hope, unemployment looks set to rise further.
In particular banks and retailers have cut jobs in recent weeks and Britain's biggest food group Premier Foods announced on Tuesday that it would slash 600 jobs in the face of weak consumer demand.
A survey by the Federation of Small Businesses showed that smaller firms were planning job cuts, too, as the economy is close to recession again.
The Bank of England is widely expected to support the faltering economy with a fresh cash injection in February, when its current 75 billion pound programme of quantitative easing asset purchases, launched in October, runs out.
A drop in inflation to 4.2 percent in December published on Tuesday boosted such expectations and also raised hopes that falling prices may allow consumers to spend more.
However, Wednesday's release showed that average weekly earnings including bonuses grew at just 1.9 percent, showing that for many households the squeeze on their budget continues.
(Reporting by UK economics team)