Unemployment figures hit five-year low

The number of people claiming unemployment benefit fell by 15,600 in August to the lowest level for more than five years and the summer saw a big increase in employment. Yet underlying earnings growth remained unchanged in July for the sixth month running.

However, unemployment measured by the quarterly Labour Force Survey, which uses the internationally-accepted definition, showed an increase of 11,000 in the three months to May.

Ministers have not decided whether to accept the recommendation of independent experts to introduce a monthly LFS, according to the Treasury. Meanwhile the divergence between the two unemployment measures left economists divided yesterday about whether there was any risk of earnings growth picking up soon.

The headline claimant count has fallen for six months running, taking the level of unemployment to 2.1 million and the unemployment rate to 7.5 per cent - both the lowest since March 1991. Employment jumped by 118,000 in the three months to June following a drop of 23,000 during the previous three months.

Three quarters of the new jobs in April-June were full time, and higher employment in services more than compensated for a small decline in manufacturing.

A further signal of strength in the jobs market was an increase in the number of vacancies at JobCentres, to the highest for seven-and-a-half years. However, official statisticians warned the level was exaggerated by the introduction of acomputer system which had reduced the number of job placements.

There was additional comfort about inflation prospects in the latest figure for underlying average earnings growth, which remained at 3.75 per cent.

The pace of increase in manufacturing was unchanged at 4.0 per cent, compared to 4.25 per cent a year earlier. In services it was 3.75 per cent, up from 3.5 per cent the previous month and 2.5 per cent a year earlier.