THE unemployment rate in the North-East is the highest in the UK, figures have revealed.

According to the Office for National Statistics (ONS), the total number of unemployed people rose by 13,000 to 83,000, giving an unemployment rate of 6.9 per cent, higher than anywhere else in the UK.

But the region's business leaders warned against panic, saying the labour market figures were distorted because fewer people were claiming incapacity benefit.

The North-East Chamber of Commerce (NECC) said the situation was not as bad as it looked.

George Cowcher, NECC chief executive, said: "The plain truth is that there are more people in work today in the North-East than a year ago.

"What we are witnessing here is a shift by people away from incapacity benefits and other types of economic inactivity.

"This rising unemployment reflects the fact that many more people are available for work.

"The ONS figures show that 19,000 more people are economically active this year compared with last year.

"That is better for the economy than having thousands of people on long-term support with little prospect of returning to the workplace.

"The challenge for us, as businesses, is to find them the right jobs or to provide them with the training opportunities for future roles."

Across the UK, the number of people claiming Jobseeker's Allowance rose for the seventh consecutive month.

Total unemployment, including people not eligible for benefit, rose by 12,000 during the quarter to July to 1.42 million.

That left the average unemployment rate unchanged at 4.7 per cent.

The number of people in work rose by 83,000 during the quarter to 28.73 million.

Meanwhile, the number of people classed as economically inactive, including those who have taken early retirement, students, or those with caring responsibilities, fell by 16,000 during the quarter to 7.92 million.

Other figures from the Office for National Statistics (ONS) showed that average earnings, including bonuses, rose by 4.2 per cent during the year to July, up by 0.1 per cent on the previous month.

Wage growth in the public sector was 5.5 per cent, including bonuses, down 0.1 per cent, while the private sector saw wages rise by 3.9 per cent - up 0.1 per cent.

Manufacturing job losses continued, with employment in the sector falling to 3.19 million in the three months to July, down 95,000 on the same period a year earlier.

The UK continues to have one of the lowest unemployment rates in the developed world.

In Yorkshire and the Humber, the number of people unemployed dropped by 3,000 to 114,000, or a rate of 4.6 per cent, which is better than the national average.