A fall in the average number of hours worked has helped prevent a rise in unemployment but that is likely to change, a leading economist said yesterday.

Mr John FitzGerald, research professor at the Economic and Social Research Institute (ESRI), said it was likely the downturn in the economy would begin to show itself in rising unemployment figures.

A second factor preventing the unemployment figures from rising recently was the creation of public sector jobs. However, that too is now likely to "grind to a halt and could actually go into reverse".

Figures released this week by the Central Statistics Office (CSO)showed that the average number of hours worked in the industrial sector fell by 2.2 per cent in the year to June 2002.

The CSO also released figures showing that employment in the industrial sector fell by 10,300 in that time, to 258,700 - a fall of 3.8 per cent. Mr FitzGerald said when the economy was more active, employees were working extra hours because of the tight labour market. When the economy slowed, the average number of hours worked fell back.

He said the figures showed that employment in the industrial sector began to fall in the second half of 2001.

Meanwhile, employment in the public sector was growing. That growth reached its peak in the second quarter of this year, when an extra 10,000 public sector jobs were created.

The growth in public sector employment was now likely to grind to a halt, he said, and could even go into reverse as a result of a jobs freeze. Employment in the market services category, which includes everything bar industrial, agricultural and public sector employment, has been flat since the second quarter of last year.

On that basis, Mr FitzGerald said that he would expect to see a "significant rise" in unemployment figures over the next year.

Of the 10,300 jobs lost in the industrial sector in the year to June 2001, 8,300 were lost in the manufacturing of electrical equipment sector. Chief economist with IIB Bank, Mr Austin Hughes, said this was an indication that the high-tech sector was responding quickly to the downturn in the global economy. The number employed in the pharmaceutical sector increased marginally in the period.

Mr Danny McCoy of the ESRI, said its latest forecast was that unemployment would peak at about 5 per cent at the end of this year and then begin to reduce again, to about 4.2 per cent by the end of 2003. However, that prediction was based on an international recovery which now seemed to be faltering.

Mr McCoy said these forecasts "are still our best call but it is beginning to look as if the international recovery is being postponed once more". He said that, if the international recovery did not take place as predicted, unemployment could rise to 5.5 per cent before it peaked and began to fall again.

"I still see an international recovery being there. The question is when it takes off."

The small and medium firms association, ISME, said the latest figures on job losses in the industrial sector confirmed its survey which had found that smaller firms were shedding jobs.