The number of Britons out of work hit its highest level in more than 17 years in November, but a much smaller than expected number of new benefit claims in December provided some hope that the labour market downturn may be levelling out.

Unemployment rose less in Britain than in most other advanced economies in the recession immediately after the 2008 financial crisis, but increased steadily through 2011 as the euro zone crisis darkened the outlook.

The government is cutting hundreds of thousands of jobs as part of its five-year budget deficit reduction programme, and the private sector is picking up only some of the slack as the euro zone crisis pushes Britain back towards recession.

The Office for National Statistics said the total number of people unemployed - using the broad, internationally-comparable ILO measure - rose by 118,000 in the three months to November to 2.685 million, the highest level since August 1994.

This equates to 8.4 percent of the workforce, above forecasts of 8.3 percent and the highest since the mid-1990s.

However, the rise in unemployment appears to be levelling off. There was a net increase of 1,200 benefit claims in December after a downwardly revised increase of just 200 in November - far below the 10,000 forecast by analysts and rises triple that in some months earlier in 2011.

While the increase in headline unemployment this month is a negative sign, the strength of the claimant count measure - which is a more timely measure - provides evidence of some resilience in the labour market, said economists at Credit Suisse.


Nonetheless, most economists said the outlook for jobs remained poor. In November the government's independent Office for Budget Responsibility forecast that the economy would grow by just 0.7 percent, and that the ILO unemployment rate would rise to 8.7 percent.

The economy is not growing sufficiently fast to maintain the level of employment, hence further job losses probably lie ahead, said Alan Clarke, an economist at Scotia Capital.

Banks and retailers have cut jobs in recent weeks and Britain's biggest food group Premier Foods announced 600 job losses on Tuesday in the face of weak consumer demand. Smaller firms are planning job cuts too, according to a survey from the Federation of Small Businesses.

The politically sensitive number of young people without a job rose to 1.043 million in the three months to November, taking unemployment for 16-24 year-olds to 22.3 percent, and employment minister Chris Grayling said joblessness was unacceptably high in a Reuters Insider TV interview.

Unlike the claimant count measure, these ILO figures include full-time students unable to find part-time work. Nomura economist Philip Rush said he believed a sharp increase in this area had been driven by EU rules implemented on October 1 which extended full-time employees' rights to many temporary workers.

Wage rises remain muted, with average weekly earnings rising by an annual 1.9 percent in the three months to November, far below the 4.2 percent rate of consumer price inflation.

Economists still expect the Bank of England to announce another 50-75 billion pounds of quantitative easing next month, extending the new round of QE launched in October.

(Reporting by David Milliken; editing by Stephen Nisbet)