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Productivity jumps but pay squeeze intensifies –

Economist Alan Clarke at Scotiabank is confident this trend will continue #8211; he believes the unemployment level will fall to 4.2pc in the October numbers to be published next month, and to 4.1pc by the end of the year.

By contrast inflation picked up to 3pc over the 12 months to September, intensifying the squeeze on household finances.

Unemployment fell by 59,000 compared with the previous three-month period, dropping to 1.42m, the lowest absolute number since 2005. That is down 181,000 on the year. As a proportion, the unemployment rate stayed at 4.3pc, its lowest rate since 1975.

The long period of slow growth is still a worry for economists, however, and one quarter of strong growth does not yet mean the poor trend is being reversed. Productivity figures are notoriously volatile. 

The number of people in work fell by 14,000 on the quarter, the ONS said, in the first such drop since last autumn.

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