Jobless toll hits 28-year low but wage pressure remains subdued

Unemployment fell to a 28-year low last month, while the number of people in work hit an all-time high with little sign of a surge in wages, official figures showed yesterday.

Unemployment fell to a 28-year low last month, while the number of people in work hit an all-time high with little sign of a surge in wages, official figures showed yesterday.

However, the benign picture was clouded by figures that show companies drastically cut the number of employees and the volume of hours worked over the winter.

The number of people out of work and claiming benefit fell by 8,300 last month. Meanwhile, November's 7,900 fall was revised to 9,200. Even the more accurate labour force survey, which also includes job-hunters not claiming benefit, fell 29,000 in the three months to November to 1.46 million, the lowest since 1984.

Although an increase in demand for staff usually triggers demands for higher wages, growth in average earnings slowed in November.

"The UK labour market remains a source of seemingly unending optimism," Ross Walker, the UK economist at Royal Bank of Scotland, said.

However, others pointed to a drop in both full-time employees and in the amount of work undertaken over the three months to November, the latest figures available.

Total weekly hours worked fell below 900 millionfor the first in 18 months. Meanwhile, firms cut 46,000 full-time posts over the quarter, although this was offset by a surge of 76,000 in the number of self-employed.

There was also a significant jump in the number of "economically inactive" - people of working age but unable or unwilling to work.

John Philpott, the chief economist at the Chartered Institute of Personnel and Development, said the figures "cloud the good news on jobs".

"They indicate the UK labour market was less tight at the end of last year than a glance at the headline jobs figures would imply," he said.

Analysts said this might explain a slowdown in average earnings growth. The annual rate slowed to 3.2 per cent in November from 3.7 per cent in the previous month.

In the services sector, which makes up two-thirds of the economy, it slowed to 3.1 per cent from 3.8 per cent. Private services - which include the City - saw a fall from 3.4 per cent to 2.7 per cent.

Ciaran Barr, the chief UK economist at Deutsche Bank, said 2003 was on track to show the first fall in real earnings - incomes minus inflation - since 1995.

"This is probably one of the key risks to the housing market and consumer spending at the moment," he said.