UK unemployment continues to fall

The number of people claiming unemployment benefit has defied predictions by continuing to fall, official figures have revealed.

The number of UK dole claimants fell by 4,900 last month, the Office for National Statistics said.

But while the headline figure fell, a second measure of unemployment, which tries to include those people not drawing benefits, showed a rise in the number of UK jobless.

Neither measure reflects the full impact of job losses in the aftermath of the September 11 terrorist attacks.

Earnings figures released in Wednesday's report revealed that the rate of salary rises slowed, suggesting wage pressures remained subdued.

Mixed picture

Although the number of dole claimants fell to 942,100, the jobless total as measured by International Labour Organisation (ILO) standards rose by 53,000 to 1.51m - the fastest rate of increase since 1993.

Subdued wage pressures have raised hopes of further rate cuts

A similar mixed result was seen last month, leading to widespread predictions that the claimant count would rise during September.

The ILO figure is seen by analysts as being more accurate than the claimant count as it is based on a survey of households, and so picks up those people who may be looking for work but are not registered for benefits.

And analysts reckon it is just a matter of time before the claimant count starts rising.

"With the recent trend, I think it's just a question of waiting," said Mark Ramsden at Stone & McCarthy.

"The pace of economic activity is weak enough now to produce a slight rise in unemployment in the coming months."

Earnings

Average earnings rose by 4.5% between June and August, down 0.1% on the previous period.

The figure was in line with forecasts and showed that, despite low levels of unemployment, wage rises were not high enough to pose an inflationary problem.

This could give the Bank of England more room to cut interest rates further.

"The average earnings figures are reassuring and, like the inflation numbers this week, they'll make it easier for the Bank to cut rates further in the face of slow growth," Mr Ramsden said.

On Tuesday, figures showed the headline rate of UK inflation falling to 1.7%, while the underlying rate dropped to 2.3%, below the government's target of 2.5%.

And on the same day, the Bank's governor Sir Edward George said he would cut interest rates again to prevent a UK recession if economic statistics suggested the threat was rising.