The UK's unemployment rate unexpectedly decreased to 4.2% for the three months ending in June, marking the lowest level since February and falling below the 4.5% predicted by analysts.

Economists had anticipated a rise in unemployment from 4.4% to 4.5%, highlighting a significant discrepancy between expectations and actual results.

This decline in unemployment was driven by a reduction of 51,000 individuals, bringing the total number of unemployed to 1.44 million.

In contrast, the total number of employed individuals rose by approximately 97,000, reaching a total of 33.094 million.

Despite the overall positive employment figures, the Office for National Statistics (ONS) noted that pay growth remains 'relatively strong' as earnings continue to outpace inflation.

However, wage growth, excluding bonuses, decreased to 5.4% year-on-year, the lowest increase since July 2022.

The slowdown in wage growth is attributed to the absence of last year's salary increases for NHS workers.

Economists from the National Institute of Economic and Social Research expressed concerns that strong wage growth could lead to persistent inflation, complicating the Bank of England's decisions on interest rate cuts.

Governor Andrew Bailey has maintained a cautious stance on future interest rate cuts, with many economists expecting rates to remain unchanged in September.

Some analysts predict that the Bank of England may implement two more 25 basis point cuts in November and December, depending on economic conditions.

Chancellor Rachel Reeves emphasized the need for increased support for employment in her upcoming budget, which will address economic recovery efforts.