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UK unemployment falls to lowest since early 1975, but pay growth undershoots

Unemployment in the U.K. unexpectedly fell in the three months to June to one of the lowest levels in decades, though average pay growth came in lower than anticipated.

The unemployment rate slipped to 4.0% in the three months to June from 4.2% in the three months to May, reaching its lowest level since early 1975, the Office for National Statistics said. The Econoday consensus was for unemployment to remain at 4.2%.

Average weekly earnings, including bonuses, grew 2.4% year over year in nominal terms in the three months to June, compared with a 2.5% reading in the three months to May. Econoday's consensus pay growth forecast was at 2.5%.

Excluding bonuses, average weekly earnings were up 2.7%, compared with a revised 2.8% in the three months to May. Adjusted for price inflation, earnings rose 0.1% including bonuses and 0.4% excluding bonuses.

"Despite the resilience of the data, the inability of wages to show any signs of pushing up from their current levels, continues to act as a significant imponderable," CMC Markets UK chief markets analyst Michael Hewson said. "This is likely to make the calculus around another rise in interest rates much more difficult, and as such is unlikely to shift expectations about a rise much before March next year, unless significant progress is made in the ongoing Brexit negotiations between now and the end of the year."

The pound was up 0.08% against the U.S. dollar as of 5:21 a.m. ET on Aug. 14.