Unemployment rate at its lowest for a decade with 31 million in work

ONS figures show the third-biggest rise over a single quarter since records began in 1971

Mark Carney is waiting for above-trend economic growth before considering a rate hike (Getty Images)

A surprise fall in unemployment to its lowest level for more than a decade gave a rare reason for cheer, despite slowing wages growth. The UK jobless rate unexpectedly fell from 5.2 per cent to 5.1 per cent in the three months to November – the lowest since October 2005 – while the overall number of unemployed stood at 1.68 million, down 99,000 on a year earlier.

The Office for National Statistics also showed the total number of people in jobs up 267,000 to 31.4 million during the period, marking the third-biggest rise over a single quarter since records began in 1971.

Stripping out bonus payments, annual pay growth eased slightly from 2 per cent to 1.9 per cent over the quarter. But households are still enjoying healthy real-terms wage rises, with inflation currently standing at just 0.2 per cent. Single-month figures showed much stronger pay levels, 2.3 per cent ahead of last year in November, while annual earnings growth in the public sector improved to 1.6 per cent, its best level since January 2013.

The figures were released a day after the Bank of England’s Governor, Mark Carney, kicked a rate rise into the long grass. The Bank is keeping a close eye on wages for signs that pay settlements could fall too sharply to hit the inflation target.

The latest report of the Bank’s agents reported activity “had grown solidly... and was expected to continue to do so over coming months”.

But the exception was manufacturing, where a “softening in pay growth had reflected slowing activity”. Low inflation was “mitigating upward pressures in pay for some companies”, it said.

“This is the key concern when it comes to wages and inflation, as this relationship can become self-reinforcing – lower earnings drive lower inflation and vice versa,” said Kallum Pickering, a senior UK economist at Berenberg.

Alongside stronger wages growth, Mr Carney also stressed that he would be looking for above-trend economic growth and a move in core inflation – currently 1.4 per cent – towards the Bank’s 2 per cent target before considering a rate increase.