UK unemployment reaches pre-crash low of 5.4% but chancellor warns of external threats

Unemployment hit its lowest point since 2008, with the rate at 5.4%, in June to August, down from 6% in the same period last year. According to the Office for National Statistics (ONS), the unemployment also fell from 5.6% in the second quarter of 2015.

With more than 31 million people in work and an all time high employment rate of 73.6%, this is good news for chancellor George Osborne and unemployment is back at pre-crash levels. The wide market expectation was an unemployment rate of 5.5%, as it was between May and July.

In a statement from the Treasury, the chancellor commented that the UK cannot be complacent with the positive data as the country's trading partners' data is showing up as being weaker. "All of this progress will be at risk unless we carry on with our plan to build a resilient economy, delivering the economic security of a country that lives within its means."

Overall pay increased by 3% including bonuses and 2.8% excluding, suggesting a higher surge in bonus payments and youth unemployment, a big issue across Europe, fell to 14.8%, the lowest point since February 2008.

"The latest labour market statistics confirmed that the UK's labour market recovery is back on track after the dip in employment in the spring," Ruth Miller, UK economist at Capital Economics, commented. "And there was less encouraging news from the timelier claimant count measure of unemployment, which rose by a monthly 4,600 in September."

The number also comes shortly after governor Mark Carney commented that the Bank of England will look at unemployment numbers rather than inflation when considering an increase of the interest rate.

"Accordingly, there does not seem much need for the MPC to panic about wage growth yet," Miller commented. "Even if pay growth continues to pick up, this need not necessarily push the MPC into an early rate hike if it is accompanied by a recovery in productivity, which we still expect to see."