Britain’s job-rich recovery continues as unemployment rate drops to seven-year low in August

UK unemployment dropped to its lowest level in more than seven years in the quarter to August, as Britain’s jobs-rich recovery strengthened over the summer.

The jobless rate fell to 5.4pc in the three months to August, from 5.6pc in the three months to May. This is the lowest level since May 2008.

The Office for National Statistics (ONS) said employment rose by 140,000 over the period, pushing the number of people in work to a record high of 31.12m. The employment rate for those of working age also hit a record high of 73.6pc.

Wage growth also continued to strengthen. Pay, including bonuses, rose by 3pc in the quarter to August, following growth of 2.9pc in the three months to July. This represents the strongest growth in more than five years.

Excluding bonus payments, pay growth eased to 2.8pc, from 2.9pc in July, according to the ONS.

While analysts had expected both total and regular pay to climb above 3pc over the period, James Knightley, an economist at ING, said low inflation would continue to boost pay packets in real terms.

Inflation, as measured by the consumer prices index (CPI) dipped back into negative territory in September.

“With headline CPI in negative territory and employment rising we are seeing substantial increases in real household earnings, which is supporting consumer confidence and should help boost consumer spending growth. This is clearly a positive for domestic activity and offers more evidence to suggest that market expectations of the first Bank of England rate rise being more than a year away seem too cautious,” he said.

George Osborne, the Chancellor, said: “It is great news that Britain’s economic plan continues to create jobs and increase pay. We’ve got the highest rate of employment in our history, and real terms pay rising strongly.”