Jobless total lowest since 1975

Unemployment fell to its lowest level for 26 years last month, official figures showed today.

The news underlines the strength of the economy, which is picking up strongly in spite of forecasts of a rise in unemployment and a surge in redundancies.

The number of people claiming unemployment benefit fell by 7,000 in May to 944,600 - a level not seen since 1975. The jobless rate dropped from 3.2 per cent in April to 3.1 per cent.

George Buckley, UK economist at Deutsche Bank, said: "We should avoid the sharp rise in unemployment that everyone was predicting at the start of the year. Unemployment will hover around current levels for the next few months."

Annual average earnings growth in the three months to April was 3.3 per cent, up from 2.9 per cent but still well below the 4.5 per cent upper limit the Bank of England deems consistent with hitting its 2.5 per cent inflation target.

Mr Buckley added: "The figures suggest the labour market is not generating inflation. The Bank of England will be pleased because it will reduce the pressure to raise interest rates."