Jobless claims fall in Feb by most since 1997

However, figures from the Office for National Statistics also showed the overall employment rate at its lowest since late 1996, suggesting the path to recovery will be a bumpy one.

An election is widely expected on May 6 and Labour, way behind in opinion polls for much of the last year and in power since 1997, is now expected to give the Conservatives a real run for their money.

Labour has pinned much of its hopes on securing recovery after an 18-month recession but party strategists had been concerned that unemployment data, which tends to lag headline growth figures, would stay bleak during the election run-in.

Figures from the Office for National Statistics showed the claimant count -- the number of people claiming jobless benefits -- fell by 32,300 in February, confounding analysts' forecasts for a rise of 8,000.

January's increase, previously reported at 23,500, was slashed to 5,300 and the claimant count rate eased to 4.9 percent, the lowest since August 2009.

"It is looking a bit better," said George Buckley, UK economist at Deutsche Bank. "It just confirms the labour market has done better in this recession than we thought it would."

SURPRISE FOR MARKETS

The number of people without a job on the wider ILO measure fell by 33,000 in the three months to January to 2.449 million. That left the jobless rate at 7.8 percent, just below forecasts for a reading of 7.9 percent.

The much better than expected data, which drove sterling higher, may help further improve the government's poll ratings before the knife-edge parliamentary election.