London - Britain's labour market continued to show modest signs of improvement in March, although a jump in the number of benefits claimants last month raised doubts about the prospect for any further strengthening.
The Office for National Statistics said the number of people without a job on the ILO measure fell by 36 000 in the three months to March, taking the jobless rate down to 7.7%. That was below forecasts for a reading of 7.8% and the lowest since the three months to September 2010.
The number of people in employment rose by 118 000 in the three-month period to its highest in more than two years.
"The UK labour market data is actually fairly encouraging," said James Knightley, economist at ING.
The government is banking on the private sector to create enough jobs to offset heavy losses in the public sector as spending cuts start to bite.
Recent surveys such as the Purchasing Managers' Indices have shown that British firms are hiring more staff.
And a study by the Chartered Institute of Personnel and Development (CIPD) and consultancy KPMG on Wednesday suggested overall employment levels may improve slightly in the second quarter of 2011.
However, they also said that the small increase in private sector recruitment was still being cancelled out by large-scale public sector job losses.
"The jobs market appears to be taking baby steps on the long path to pre-recession levels," Gerwyn Davies, Public Policy Adviser at the CIPD, said.
"There are many sectors, such as manufacturing, that are taking large strides forward. But consumer-facing industries are simply edging forwards due to a fear of another consumer slowdown."Benefits claims jump
The ONS data showed that the number of people claiming jobless benefit rose by 12 400 last month - the biggest rise in more than a year and following an upwardly revised increase of 6 400 in March.
But it said the figures were being skewed by recent changes in benefits rules for lone parents - mainly women - which had led to a rise in the number of people seeking employment and therefore eligible to claim jobseekers allowance.
Nonetheless, some analysts took these figures as a warning sign for the months ahead.
"The pick-up in the claimant count is a bit of a surprise. It's showing a slightly weaker picture," said Marchel Alexandrovich, economist at Jeffries International.
"We know what the story is: private sector adding jobs, public sector shedding them. So it's a matter of which one of those wins out."
Average weekly earnings growth including bonuses unexpectedly accelerated to 2.3% in the three months to March from 2.1 percent in the three months to February, but is still well below the current rate of inflation.
"Earnings growth remains deeply negative in real terms, and will continue to act as a major constraint on household spending," said Jonathan Loynes of Capital Economics.