you shouldn't better use <xsl:for-each>, in most cases it's terrible 
construction. instead of it, use <xsl:apply-templates>:

<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet version="1.0" 
xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
<xsl:output method="xml" encoding="UTF-8" indent="yes"/>
<xsl:template match="/*">
    <occupationCategories>
        <xsl:apply-templates select="Table/Occp_cat">
            <xsl:sort select="." data-type="number"/>
        </xsl:apply-templates>
    </occupationCategories>
</xsl:template>
<xsl:template match="Occp_cat">
    <xsl:param name="id" select="./text()"/>
    <xsl:if test="not(preceding::Occp_cat[.=$id])">
        <category ID="{$id}">
            <desc><xsl:value-of select="../occp_cat_desc"/></desc>
            <xsl:apply-templates select="/*/Table[Occp_cat[.=$id]]/Occp_ID">
                <xsl:sort select="." data-type="number"/>
            </xsl:apply-templates>
        </category>
    </xsl:if>
</xsl:template>
<xsl:template match="Occp_ID">
    <occupation ID="{.}"><xsl:value-of select="../Occp_Desc"/></occupation>
</xsl:template>
</xsl:stylesheet>

-- 
td
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