UK jobless rate nears six-year low

UK unemployment edged closer to a six-year low in the three months to the end of June, official figures have shown.

The Office for National Statistics said the unemployment rate fell to 6.4% in the quarter, the lowest since late 2008 and down from 6.5% in May.

The number of people unemployed fell by 132,000 to 2.08 million.

But average wages excluding bonuses rose by 0.6% in the year to June, the slowest rise since records began in 2001.

Including bonuses, wages fell 0.2%, the first fall since 2009.

The ONS figures show that about 40% of the increase in employment levels in the UK over the past year was among people who were not born in the country.

The number of UK-born workers rose by 502,000, said BBC home affairs correspondent Danny Shaw.

The number of workers born overseas (including some UK nationals) went up by 326,000.

The ONS says the country of birth of some workers was not known, resulting in a total employment increase year-on-year of 816,000.

There was a big increase in the number of workers from the so-called A8 countries - former Soviet bloc states such as Poland, Hungary and Lithuania, which joined the EU in 2004.

"The number has risen by 178,000 in a year - that's an increase of more than a quarter - eclipsing the rise in any other category of foreign workers," our correspondent says.

If you count the figures by nationality, as opposed to country of birth, the total employment increase was 820,000, more than a quarter of which was due to a rise in foreign national workers.

The number of UK nationals working in the UK increased by 601,000.

The number of non-UK nationals working in the UK increased by 219,000.

The ONS said the number of people claiming Jobseeker's Allowance fell for the 21st month in a row in June, by 33,600 to 1.01 million.

If the claimant count shows a further decline next month, it will fall below one million for the first time since September 2008.

The ONS said average wage rises were affected by an unusually high number of employees deferring bonus payments until after the top rate of tax was cut from 50p to 45p last year, which have skewed year-on-year comparisons.

However, low average wage inflation has been cited by Bank of England governor Mark Carney as a growing concern for monetary policymakers and is likely to have a bearing on the timing of any interest rate decision.

On Wednesday, the Bank of England halved its forecast for average wage growth, saying it now expected average salaries to rise by 1.25% this year.

Low average wage rises are an indication of the level of so-called "spare capacity" in the economy.

Spare capacity is the Bank of England's measure of the extent to which the UK economy is underperforming, as a result of a lack of business investment either in hiring new staff, technology or machinery.

Jeremy Cook, chief economist at World First, said the wage data was a blow for those who were expecting an early rise in UK interest rates.

He said the first fall in wages including bonuses since 2009 "will come as a real gut punch for those investors and central bank watchers looking for an interest rate increase in the UK in [the fourth quarter] of this year".

David Kern, chief economist at the British Chambers of Commerce, said the decline in wages growth "is a warning sign that the economic recovery, although on the right track, is still fragile."

Chris Williamson, chief economist at research firm Markit, said that the trend of falling unemployment would be likely to continue for the second half of the year.

"The improvement in the general economy means unemployment is set to fall further as we move through the second half of the year, with a high probability that joblessness will drop below 6% by the end of the year. There's much less certainty, however, about wage growth," he said.

The figures for unemployment in the three months to the end of June are based on the Labour Force Survey, in which the ONS speaks to 60,000 households once a quarter, making it the country's biggest household survey.

The ONS is 95% confident that the figure of a 6.4% rate of unemployment is correct to plus or minus 0.2 percentage points - in other words, it's between 6.2% and 6.6%.

Analysis

BBC News head of statistics, Anthony Reuben:

It's important to remember what the average earnings figure measures, which is the average of what everybody is earning across the country.

Falling average earnings does not necessarily mean individuals are having their pay cut - it might fall if lots of people got part-time jobs, or if many new low-paying jobs were created, for example.

Another ONS survey tracks how the wages of a selection of full-time employees has been changing, and while the most recent figures we have from that are for April 2013, at the time they were showing considerably greater rises than average earnings.

The number of young people out of work also fell in the three months to June by 102,000 to 767,000, more than 200,000 lower than a year ago, the biggest fall since records began in 1992.

Work and Pensions Secretary Iain Duncan Smith said: ""In the past, many people in our society were written off and trapped in unemployment and welfare dependency.

"But through our welfare reforms, we are helping people to break that cycle and get back into work," he said, adding that the government's long-term economic plan was "working".

But Labour shadow employment minister Stephen Timms said: "While today's fall in overall unemployment is welcome, it's extremely worrying that the figures have shown pay falling far behind inflation, and the change in regular pay being the lowest ever on record.

"Millions of working people face a cost-of-living crisis which has left them over £1600 worse off since 2010," he added.

UKIP migration spokesman Stephen Woolfe said: "Since the start of this year alone, a migrant influx equivalent to the population of Peterborough has arrived in this country. This is simply unsustainable."

The ONS said that employment figures "relate to the number of people in employment and should not be used as a proxy for flows of foreign migrants into the UK".