UK unemployment drops to pre-crisis levels

The UK unemployment rate unexpectedly fell to 5.2 per cent in the three months to September

More than half of women aged 18-25 who took part said that they believed people who are unemployed should have to take any job available, or lose their unemployment benefit (Getty)

The UK unemployment rate unexpectedly fell to 5.2 per cent in the three months to September, its lowest level in almost 10 years, despite predictions that the jobless rate would remain steady at 5.3 per cent.

The Office for National Statistics said on Wednesday that the number of people out of work fell by 110,000 to reach 1.71 million.

There are now 31.1 million in work, an increase of 505,000 compared with a year earlier.

However, average wage growth in Britain rose at its slowest rate since early 2015 in the three months to October.

Averages earnings rose by at an annual rate of just 2 per cent, down markedly from the 2.4 per cent seen in the previous quarter. Earnings including bonuses also slowed, with growth falling from 3 per cent between July and September to 2.4 per cent in lastest three.

The shock pay slowdown underscores one of the reasons why the Bank of England is unlikely to follows its US counterpart with an imminent rate rise.

“Overall, these figures will cement expectations that a rate rise is still some way off, as some MPC members have recently said they need to see wage growth accelerating before voting for a hike.” Scott Bowman, UK economist with Capital Economics said.

“Wage growth remains subdued, and this makes it less likely that we will see interest rates increase during 2016. With very low inflation, the average pay packet is still increasing in real terms, but this will only be sustainable if productivity increases” Mark Beatson, the chief economist at the Chartered Institute of Personnel and Development added.

While the US Federal Reserve, chaired by Janet Yellen, is widely expected to raise rates on Wednesday evening for the first time in nearly a decade, the Bank of England’s Governor Mark Carney has said he would like to see earnings growth above 3 per cent a year before an increase in UK interest rates.

The BoE's chief economist Andy Haldane has warned that growth in earnings in Britain appears to be fizzling out.

In the United States, by contrast, strong US jobs numbers have added to expectations that the Federal Reserve will raise interest rates later on Wednesday.

Additional reporting by Reuters