The latest unemployment figures published by the Office for National Statistics (ONS) show a rise in the number of unemployed by 44 000 over the three months to December 2010, taking the unemployment rate to 7.9 per cent, a rise of 0.1 per cent on the quarter. The number of people claiming Jobseeker's Allowance rose to 1.46 million between December 2010 and January 2011, a rise of 2 400.

The employment rate for the quarter to December 2010 fell to 70.5 per cent. There are now 29.12 million people in work, this number falling by 68 000 - a reduction of 0.3 per cent on the quarter.

One of the more notable details to come out of the figures is the preponderance of unemployment amongst the younger age groups in the population. Of those aged between 16 and 24, the unemployment rate is now 20.5 per cent, an increase of 1.5 per cent on the quarter. This represents a rise in the number of people in this age group not able to find a job of 66 000 and there are now 965 000 people in the age group without work.

The labour market data may not make for pleasant reading for the government and analysts suggest that it is likely to get worse in the coming months as the public spending cuts start to take effect. Perhaps one small grain of comfort is that the growth rate in annual earnings (including bonuses) was subdued at 1.8 per cent for the three months to December 2010 compared to 2.1 per cent for the three months to November.

Given the rate of inflation, this confirms what Mervyn King said in a speech earlier this week - that UK citizens will find that their incomes are squeezed as prices rise but incomes do not keep pace. However, if one can look in the medium term this is a good thing because it does not point, at this stage, to any sort of wage-price spiral fuelled by expectations of higher inflation.