* December jobless benefit claims fall by 4,100
* Total ILO unemployment up 49,000, biggest rise since March
* Jobless rate stays at 7.9 pct
* Muted wage growth should reassure BoE on inflation
(Adds detail, trade union reaction)
By David Milliken and Fiona Shaikh
LONDON, Jan 19 (Reuters) - British unemployment rose at its fastest pace in 8 months in November against a backdrop of weak pay growth, suggesting the recovery lost pace in late 2010 and boding ill for 2011 when government cost-cutting kicks off.
Wednesday's figures suggest the labour market remains in a weak state more than a year after the end of Britain's deepest recession since World War Two.
Economists expect unemployment to keep rising this year, when the government starts a programme of spending cuts that will cost 330,000 public sector jobs over the next four years.
Wage growth also remained in check, implying that high inflation is not becoming embedded in the economy, giving the Bank of England the option to hold off raising rates for now.
"The bigger picture is it's going to take a long time for the unemployment rate to come down because we're still operating well below the level that we were a couple of years ago in terms of output," said George Buckley, economist at Deutsche Bank.
Analysts reckon that official data next week will show economic growth slowed sharply at the end of last year after a relatively robust expansion between April and September, with a further slowdown expected in the first half of 2011.
The Office for National Statistics said the number of people out of work on the internationally-comparable ILO measure rose by 49,000 to 2.498 million in the three months to November -- the biggest increase since the three months to March 2010.
The increase was driven by a record jump in youth unemployment, which took the number of 16 to 24 years olds without a job to just below 1 million -- its highest in almost 20 years.
However, this was not enough to lift November's overall jobless rate from the 7.9 percent recorded in the three months to October.
And the rate of claimant count unemployment held steady at 4.5 percent in December, despite an unexpected fall of 4,100 in the number of people claiming jobless benefits on this measure -- a more timely but less comprehensive figure than the ILO one.
"With the worst of the cuts still to come, this government risks making high joblessness a permanent feature of our economy," said Trades Union Congress leader Brendan Barber.
WAGE WEAKNESS
British unemployment rose relatively little during the 2008-09 recession, giving limited scope for a strong rebound as the economy recovers and demand improves.
This is partly why wage growth has also failed to pick up significantly, despite surging consumer price inflation, which hit an 8-month high in December.
Average earnings growth including bonuses held at an annual
rate of 2.1 percent in the three months to November, below
forecasts for a reading of 2.2 percent and after a downwardly
revised 2.1 percent in the three months to October.
Pay growth is less than half the rate of Retail Price Inflation, which is used as the benchmark for most pay deals, and well below Consumer Price Inflation, which has been above the BoE's 2 percent target for most of the past five years.
Analysts say that will constrain already-tight household budgets, limit consumer spending and pose a risk to the recovery -- factors that might dissuade the BoE from rushing into raising interest rates despite persistently above-target inflation.
"We expect wage growth will remain muted due to workers' weak bargaining position, given high and likely-to-rise unemployment," said Howard Archer, economist at IHS Global Insight. "This is the key factor underpinning our belief that the BoE may yet hold off from raising interest rates until the fourth quarter."
Excluding bonuses, the rate of pay growth was also steady at 2.3 percent in the three months to November. However, the rate for November alone picked up to 2.4 percent, its highest since February 2009.
However, some economists said it was too early for the BoE to sound the all-clear on wage growth, as a lot of wage settlements are reached early in the New Year.
"The biggest period for wage claims is in January and April, so at the start of next month we might have a better picture as to what's been happening to settlement claims," said Deutsche Bank's Buckley. (Editing by Ruth Pitchford, Ron Askew)