DESPITE the slowdown in the economy, the employment figures have remained remarkably resilient, though evidence is now emerging of a north/south divide, with Scotland among those parts of the UK where unemployment is on the increase while it is still declining in the south of England and part of the Midlands. The figures are difficult to interpret and quantify and the underlying trend is not entirely clear. One point beyond dispute is that job losses have been heavily concentrated in the manufacturing sector, where recessionary forces gathered momentum last year. Manufacturers have been suffering from the strength of the pound, the slowdown in overseas activity, and, in some sectors such as textiles, competition from cheap imports. By contrast, the service sector of the economy was remarkably buoyant, though by the end of last year gross domestic product was growing at a snail's pace.

The imbalance in the economy, a growing feature over the past two or three years, offers a likely explanation for unemployment moving in opposite directions on a north/south axis. The real surprises are that unemployment is still falling in the UK as a whole to a level not seen since 1980 and there are now a record number of people in work. One explanation for this is that employers may be hoarding labour in the expectation that the downturn will not last long. Another is that the country is being saved from the worst by debugging ahead of the millennium and by the launch of the euro, which may account for the large fall in unemployment in London.

Scotland is fortunate in being a favoured spot for financial services operations and the hi-tech employment they can bring. They mostly provide jobs of quality for commuters and priceless diversification, but they are not a substitute for losses in manufacturing. The traditional industrial areas where factories are concentrated are increasingly being left out in the cold. The worst is still ahead. Demand for labour is slow to respond to changes in activity, though survey evidence from the Confederation of British Industry and the Chartered Institute of Purchasing and Supply suggests that the pace of job losses will speed up in the coming months and unemployment will hit most sectors of the economy. UK unemployment could be 300,000 higher by the end of the year with most of the country suffering.