Employment in the public sector increased by 7,000 in the fourth quarter, according to the latest figures released by the Office for National Statistics (ONS).

Taking into account seasonal adjustments, the ONS said that employment in the sector rose to 5.78 million people by the end of the quarter.

While employees in the civil service fell by 3,000, the nationalisation of Northern Rock - effective from October 9th - added more employees to the public sector jobs payroll.

By comparison the private sector saw jobs increase by 159,000, with the overall number up by 166,000 in the three months to January.

John Philpott, chief economist at the Chartered Institute of Personnel and Development, said the news was welcome but stressed that the year ahead in the jobs market could be more challenging in light of the credit crunch.

"All the forward looking independent employment surveys now suggest that demand for staff in the economy as a whole will be lower this year than at any time for a decade," he warned.

Dr Philpott also noted how the rate of growth in public sector pay caught up with that in the private sector in 2007, as earnings between the two sectors closed.