The standardised unemployment rate inched closer to the 5 per cent watershed last month, the latest live register figures reveal.

The number of people claiming benefit increased by 7,506 to 166,142, lifting the jobless rate to 4.4 per cent from 4.2 per cent in November, although the seasonally adjusted total fell by 300 to 164,700.

Year on year job losses for 2002 climbed to 9 per cent from 7.8 per cent for the previous month, an indication of further softening in the economy according to analysts.

Deterioration in the labour market is likely to accelerate over the coming year, pushing the jobless rate as high as 5.2 per cent, commented Mr Jim Power, chief economist with Friends First.

The unadjusted rise in unemployment underscored the extent to which the Republic remains vulnerable to international trends, said Mr Niall Dunne, financial markets economist, Ulster Bank Treasury.

With jobless levels climbing across the euro-zone and in the US, it is inevitable the Irish labour market will continue to shrink, he said. "We are a small open economy and, as the live register shows, we are vulnerable to international trends," he said.

The seasonally adjusted decrease in numbers out of work indicated the labour market has started to stabilise after the worst year for redundancies since 1988, said Mr Austin Hughes, chief economist with IIB bank. "December was not marked by the sort of heavy job losses which we witnessed earlier this year. We may be returning to a more stable outlook for 2003."

Opposition politicians seized on the figures as evidence of the Government's inability to steer the economy through a prolonged downturn. Labour enterprise and employment spokesman Mr Brendan Howlin said the data made for bleak reading.

He added: "Unfortunately nothing was done in the Budget to stimulate or encourage job creation and a number of the industrial development agencies enter 2003 with much reduced budgets as a result of cuts in the Estimates for this year. "Unless the Government takes a much more focused and pro-active approach, there is a real danger that live register numbers will continue to drift upwards."

While the live register is not considered the most accurate barometer of employment, as it includes part-time, seasonal and casual workers drawing benefit, the results are in line with previous estimates.

The last Quarterly National Household Survey, regarded as the most dependable measure of unemployment, shows 86,700 out of work from June to August, a 9,500 rise on the preceding quarter.