UK unemployment falls slightly as pay growth slows

The UK's unemployment rate has fallen slightly, official figures show.

Unemployment was 4.2% in the three months to the end of June, down from 4.4% over the previous quarter.

Meanwhile, wage growth continued to slow, rising at an annual rate of 5.4% - the weakest for around two years.

However, the Office for National Statistics (ONS) said pay growth remained "relatively strong" with earnings continuing to rise faster than prices.

ONS director of economic statistics Liz McKeown said the outlook for the UK jobs market remained "a mixed picture", with signs it is starting to cool.

"Basic pay growth [excluding bonuses], while remaining relatively strong, continues to slow," she told the BBC's Today programme.

"Growth in total pay slowed markedly, with last year's one-off NHS bonuses affecting the comparison," she said.

While the number of job vacancies also dipped, the total number remains above levels seen before the pandemic.

The ONS has urged caution, however, about giving too much weight to its jobs figures at the moment.

The Labour Force Survey conducted by the ONS, which produces the data, has had a smaller number of respondents over the past year than normal.

Chancellor Rachel Reeves said the latest numbers showed there was "more to do in supporting people into employment".

“This will be part of my Budget later in the year where I will be making difficult decisions on spending, welfare and tax to fix the foundations of our economy so we can rebuild Britain and make every part of our country better off."

The figures could help determine whether the Bank of England votes for further interest rate cuts this year.

In a closely-run decision, policymakers cut the rate to 5% from 5.25% earlier this month - the first such reduction for more than four years.

Interest rates dictate the cost of borrowing set by High Street banks and money lenders for the likes of mortgages and credit cards.

“Falling pay growth could help reassure the [Bank's] Monetary Policy Committee that domestic inflationary pressures are subsiding," said Yael Selfin, chief economist at KPMG UK.

She added that despite the cut earlier this month, interest rates remained high which was leading firms to cut back on hiring.