Unemployment reaches 20-year low

UK unemployment has fallen to its lowest level in 20 years.

But wages are continuing to rise rapidly, although at a slightly slower rate than last month.

The latest figures for the month of April show that the number of people unemployed and claiming benefit tumbled by 28,800 to 1,112,000, or 3.9% of the workforce.

ILO regional unemployment (Jan-March)

North East 9.0%

North West 6.1%

Yorkshire 6.3%

East Midlands 5.2%

West Midlands 6.1%

East 4.0%

London 7.6%

South East 3.5%

South West 4.3%

Wales 6.8%

Scotland 7.5%

N Ireland 6.6%

The drop was the largest since July last year and much bigger than expected.

The broader measure of unemployment, based on the standards of the International Labour Organisation, also showed a fall of 20,000 to 1.7m, an unemployment rate of 5.8%.

These figures are an average of the first three months of the year.

But the regional divide between North and South remains strong, with unemployment in the Northern region nearly three times higher than in the Southeast.

And for the first time in six years the number of workers in manufacturing industry has dropped below 4m, as exporters continue to suffer from the effects of the high pound.

Average earnings still rising fast

Although the growth in average earnings slowed slightly from previous months, wages are still rising rapidly and much faster than the Bank of England would like.

It closes watches wage rises for signs of inflation.

Average earnings grew by 5.8% in the period from January to March, compared to 6.0% over the December to February period, as millennium bonuses began to drop out of the figures.

But the Bank of England has said that any increase above 4.5% in wages is incompatible with its inflation target of 2.5%.

The Treasury was quick to call for further wage restraint in both the public and private sector.

"This is essential for continued stability and steady growth," a spokesman said.

The earnings figures also emphasised the "two-speed economy," with wages in the private services sector surging by 6.6%, fueled by March bonuses in the financial sector.

The Bank has said that it was waiting to see the effect of bonus payments on wages before making a decision to raise interest rates further.

These figures will ease fears that inflationary pressures in the economy are accelerating.