Companies in the West Midlands are optimistic about job prospects despite figures showing a 6.4 per cent increase in unemployment across the region in the three months to August.

The Office for National Statistics said that unemployment had increased by 4,000 to 169,000 in the West Midlands while nationally the figure had risen to 1.79 million, the highest jobless rise since 1991.

Kiran Virk, policy adviser at Birmingham Chamber of Commerce and Industry, said that despite current trends many companies expect to increase the size of their workforce over the next three months.

She said: “The figures are no surprise considering the economic situation has deteriorated since the last figures were published showing a fall of 7,000 in unemployment in the region. “The chamber’s quarterly economic survey results for the third quarter show that businesses are working harder than ever to weather the storm and many of our members are expecting to increase the size of their workforce over the next three months.

“The domestic market is under pressure but local businesses are responding to the slowing UK economy by diversifying into export markets. The strength of the export market may reflect why many of our members are looking to increase their workforce.

“These are challenging times for the business community but our evidence shows us that our members are continuing to sell their goods and services, and are gaining orders within the UK and abroad.

Other figures also confirmed fears that the economic slowdown was now hitting jobs and employment prospects.

A total of 147,000 people were made redundant in the three months to August, an increase of 28,000 on the previous quarter.

Meanwhile the number of people classed as economically inactive, including people looking after a relative, on long-term sick leave or who have given up seeking work, rose by 16,000 in the latest period to 7.89 million, more than 20 per cent of the working age population.

Seperately earnings continued to lag more than a full percentage point behind inflation in August.

Official numbers from National Statistics confirmed that pay deals have failed to compensate employees for this years’ surge in oil, gas and electricity prices.

Some speakers at a recent Bank of England discussion argued that this was a bigger factor than the credit crunch in Britain’s economic slowdown this summer. The Bank, though, has feared, at least until very recently that expectations of rising inflation could fuel aggressive pay demands that could develop into a medium-term inflationary spiral.

NS reported that average earnings, including bonuses rose by 3.4 per cent in the year to August, down from 3.5 per cent for the year to July.

Over the same 12 months, prices rose by 4.7 or 4.8 per cent depending on the measure used. Regular pay, not counting bonuses, rose by 3.6 per cent in both the private and public sectors, down from 3.7 per cent in the year to July.

Bonuses were a lower across the board than in the same months of 2006-07, with the result that their inclusion lowers the overall rate of increase.

Taking bonuses into account, public sector workers with increases averaging 3.5 per cent did slightly better than their counterparts in the private sector where earnings rose by only 3.4 per cent.