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UK unemployment rate drops as economy strengthens but wages remain subdued

LONDON - Britain's unemployment rate is falling sharply as the economy continues to strengthen, but wage growth continues to lag, official figures showed Wednesday.

The Office for National Statistics said the jobless rate dropped to 6.6 per cent in the three months ending in April from 7.2 per cent in the period ending in January.

Some 72.9 per cent of the population aged 16 to 64 was working, still just slightly less than before the 2008-2009 economic downturn brought on by the global financial crisis. There were 780,000 more people working than a year earlier.

Pay including bonuses inched up by just 0.7 per cent from a year earlier — well below the inflation rate of 1.8 per cent. Chris Williamson, the chief economist of Markit, says the weak growth and the "'cost of living crisis' remains the Achilles Heel of the economic recovery."

He expects wage growth to accelerate as the labour market tightens. How long that will take is likely to affect how early interest rates rise.

Economist Samuel Tombs of Capital Economics says the drop in the unemployment rate theoretically brings the prospect of an interest rate rise by the Bank of England closer, since the rate is below the bank's forecast of 6.7 per cent.

But he says there's still "considerable slack" in the market.

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