* Claimant count jobless up 2,300 in Aug, 1st rise since Jan
* Employment also rises, helped by students taking jobs
* Public sector layoffs ahead due to fiscal squeeze
(Adds detail, context)
By Christina Fincher and Fiona Shaikh
LONDON, Sept 15 (Reuters) - The number of Britons claiming jobless benefit rose last month for the first time since January, raising fears the recovery could be faltering even before the bulk of public spending cuts kick in.
The Office for National Statistics said claimant count unemployment rose by 2,300 in August, confounding expectations for a modest decline and bringing to an end a six-month period in which it had fallen by more than 150,000.
Wednesday's labour market report contained some encouraging aspects. The number of people in work rose by a record 286,000 in the three months to July. However, more than half of this was due to part-time positions and the increase was also flattered by a large number of students leaving university and taking jobs.
The less-timely ILO measure of unemployment, which includes those out of work but not claiming benefit, fell by 8,000 in the three months to July to 2.467 million, the smallest fall since the three months to April.
The pound fell after the figures, which some analysts said could prove to be a turning point after the improvement seen in the first half of the year.
"The most eye-catching feature was the rise in the claimant count in August which increases concerns that the labour market is on the turn," said Andrew Goodwin, senior economic advisor to Ernst & Young.
"This is particularly concerning given that this comes before the public spending cuts have really got underway."
AUSTERITY AHEAD
August's rise in the claimant count is bad news for the government which is hoping to cut its welfare bill as part of its austerity drive.
Most economists are pencilling in further rises later this year as the government embarks on the toughest fiscal squeeze in a generation.
Britain's independent Office for Budget Responsibility has estimated more than half a million public sector workers could lose their jobs as the government attempts to cut a record deficit to next to nothing over the next five years.
"Employment is likely to slow materially over the next few months as public sector job cuts take their toll," said Amit Kara, UK economist at UBS.
The squeeze on the public purse is already having some impact. The number of people employed in the public sector fell by 22,000 in the three months to June, the second quarterly fall.
Speaking at conference of trade unions, Bank of England Governor Mervyn King said the austerity drive was necessary to cut the country's budget deficit, but admitted that the economic outlook remained fragile.
Average weekly earnings growth including bonuses rose by 1.5 percent in the three months to July, up from a 1.1 percent rise in the three months to June but still well below the historical average.
The government welcomed the rise in the employment level but did not shirk from the challenge ahead.
"We will have to go through this process in the coming years of trying to rebalance our economy to increase the number of private sector jobs," said a spokesman for Prime Minister David Cameron.
For more stories on UK government spending cuts and their impact, click on
(editing by Ron Askew)