UK jobless claims unexpectedly rose in March, due in part to a change in benefit rules which had implications for women in the labour force.

Jobless benefit claims rose by 700 from February to 1.451 million, the Office for National Statistics said today in London.

Unemployment measured by International Labour Organization methods slipped to 7.8 per cent in the quarter through February from 7.9 per cent in the three months through November.

Payrolls rose to the highest in two years in the quarter, which may add strength to Prime Minister David Cameron's argument that the economy can withstand a government budget squeeze that will more than 300,000 public-sector jobs.

While the Bank of England is aiding the recovery by keeping its key interest rate at a record low, consumer confidence remains weak on concern that unemployment may increase.

"The data is mixed. The fall in the unemployment rate is fairly good news, but we have to bear in mind that most of the public-sector job losses are still to come," said Hetal Mehta, a London-based economist at Daiwa Capital Markets Europe. "Combined with the fact that average earning growth is low, the Bank of England won't be in a rush to put up interest rates."

The pound pared its gain against the dollar after the report. It traded at $1.6260 as of 10:13 a.m. in London, little changed from yesterday.

Bonds declined, with the yield on the 10-year gilt rising 3 basis points to 3.73 per cent.

In March, 4,400 men came off jobless benefits and 5,100 women joined the register. The statistics office said a change in eligibility for single-parent benefits, which disproportionately affects women, pushed more people into the labor market to seek work.

The UK claimant count rate stayed at 4.5 per cent in March.

UK policy makers left their benchmark interest rate at 0.5 per cent this month. While inflation is double the Bank of England's target, it eased to 4 per cent in March from 4.4 per cent in February, data yesterday showed.

Today's report showed that pay growth slowed in the quarter through February, supporting the central bank's argument that above-target inflation isn't fueling demands for higher pay.

Weekly pay including bonuses rose 2 per cent in the quarter from a year earlier, compared with a 2.3 per cent gain in the previous three months.

The slowdown was led by financial services and manufacturing. Excluding bonuses, pay growth eased to 2.2 per cent from 2.3 per cent.

Bloomberg