Unemployment rose to 7.4% in the three months to February, up 0.2% on the previous quarter.

The unemployment rate increased from 7.2% in November to January, to 7.4% in December to February, taking the number of unemployed people to 256,000.

However, the underemployment rate decreased from 3.1% to 2.9% over the same period.

Unemployment rose in the construction, manufacturing and transport sectors, more than offsetting the decreases seen in the retail trade and hotels sectors.

Secretary for Economic Development & Labour Stephen Ip said the jobless rate increased in the construction sector due to a slowdown in new private-sector building projects as well as a reduction in the Public Housing Programme.

There was also reduced work in decoration and maintenance immediately after the Lunar New Year period. These together resulted in the layoffs of more construction workers, mostly engaged in temporary or part-time work.

Mr Ip said if war breaks out in Iraq, Hong Kong's employment market will be under short-term pressure, its intensity depending on how long the war lasts.

However, Mr Ip reiterated that Hong Kong is a safe place, and he believed the tourism industry will not be affected much should war break out.