Wages are rising in the public sector, with average pay increasing 4.7% in November compared with 4.1% in October, according to figures from the Office for National Statistics.

We must continue to have discipline in public sector pay Gordon Brown

The statistics came alongside figures showing unemployment at its lowest levels since 1975, with 928,000 people out of work and a record 27.8 million in employment.

Around five million people are employed in the public sector out of a working population of almost 28 million, according to the Office for National Statistics.

Nick Brown, minister for work, said the jobless figures showed a "steady improvement" in the labour market, but there was concern among unions and some MPs over the loss of manufacturing jobs.

Urgent

The sector now employs just over 3.5 million people, a record low, after a fall of 155,000 in the year to last November.

Bill Morris, general secretary of the Transport and General Workers Union said: "We cannot go on like this.

"The Department of Trade and Industry must act with a sense of urgency and set up a constructive dialogue with the unions and industry. We can no longer apologise for buying British."

His comments were echoed by Paul Holmes, the Liberal Democrat's shadow minister for work, and Tory spokesman Tim Yeo.

Mr Yeo said the figures contradicted the government's stress on the importance of the sector, while Mr Holmes said: "Jobs in manufacturing are being lost hand over fist, yet the government is doing little. The UK is experiencing the longest manufacturing recession since the war."

Alongside that concern over manufacturing, there are fears among economists that despite an otherwise rosy picture in the labour market, any big pay rises in next month's public sector pay round could push inflation up.

Pay warning

Chancellor Gordon Brown has warned that rises above the rate of inflation would be not be agreed amid fears that pay demands could eat into his plans for increased spending on schools and hospitals.

With firefighters demanding a 40% wage hike, Mr Brown used an interview with The Times to point towards low single-figure rises for many workers.

Pay review boards for soldiers, teachers, prison officers, the judiciary and civil servants are due to announce their findings soon.

Mr Brown said: "We must continue to have discipline in public sector pay.

"We will be looking at the reports of the review bodies over the next few weeks. We are doing this in an atmosphere of relatively low inflation, the lowest for 30 years or more.

"You will see this reflected in the settlements we make."