unemployment falls below two million

Woman walking past Job Centre

UK unemployment has fallen below two million in the three months to the end of August for the first time in almost six years, official figures show.

The number of jobless people fell by 154,000 to 1.97 million over the quarter, the Office for National Statistics said.

The drop, which is bigger than analysts expected, took the unemployment rate to 6%, its lowest level since late 2008.

The employment rate is now 73%, close to its all-time high of 73.2%,

However, the increase in employment over the three months marks the weakest quarterly gain since May last year, which many economists said suggested the economic recovery was slowing.

“The UK labour market remains strong. However, there are some areas of concern such as the slowest increase in employment for 15 months, which suggests that the pace of economic growth is easing,” said British Chambers of Commerce (BCC) chief economist David Kern.

To the end of May, the number of unemployed people fell by 538,000, the largest annual fall since records began.

But the number of people choosing not to seek work increased.

Those classed as economically inactive, such as students, long-term sick and those retiring early, increased by 113,000 in the quarter to more than nine million.

Wage growth also remained stubbornly below the current 1.2% rate of inflation.

Average weekly earnings in the June-to-August period, excluding bonuses, rose by 0.9% from a year earlier. Including bonuses, earnings rose by 0.7%.

“Real pay continues to drop, carrying on the trend that began six years ago. Weak pay is bad news for household budgets, but also for the levels of income tax receipts and the UK’s fiscal position,” said Martin Beck, senior economic advisor to the EY ITEM Club.

Shadow work and pensions secretary Rachel Reeves criticised the weak growth in wages. “Wages still well behind inflation. The pay squeeze on working people continues,” she tweeted.

But employment minister Esther McVey said: “Today’s record figures show that the government’s long-term economic plan to help businesses create jobs and get people working again is proving successful.”

And the chief secretary to the Treasury, Danny Alexander, said: “Britain is fast becoming the job creation capital of the Western economies. Because our recovery plan is working, so is the country and in record numbers.”

Other key figures included show:

  • The number of people claiming Jobseeker’s Allowance in September fell by 18,600 to 951,900, the 23rd consecutive monthly reduction.
  • The number of self-employed people dropped by 76,000 in the latest three-month period to 4.5 million, but the total is 279,000 higher than a year ago.
  • The number of employees in part-time jobs has reached a record high of 6.8 million.
  • Youth unemployment – covering 16-to-24-year-olds – fell by 88,000 over the quarter to 733,000, giving a jobless rate among the age group of 16%.