By Marcus Leach

Official figures released today (Wednesday) have revealed that the rate of unemployment in the UK dropped to 7.7% between May and July.

This marked a 0.1% drop from 7.8% in the previous three months and brings the rate closer to Bank of England governor Mark Carney's goal rate.

Carney said that interest rates are unlikely to be raised before the rate falls to 7%.

The number of people unemployed fell 24,000 in the period to 2.49 million.

The official figures also showed the number of people claiming Jobseekers' Allowance fell 32,600 to 1.40 million, its lowest level since February 2009.

Mr Carney said he expected the fall to 7% to take at least three years.

Average pay rose by 1.1% compared with the same time last year, which is well below the 2.8% rate at which prices are rising.

“Data from the UK has continued to hit record numbers over the summer, so it would have been slightly strange had UK unemployment not reached a multi-month low in August. The unemployment rate currently sits at an 8 month low and the claimant count fall of 36.3k was the largest since June 1997," Jeremy Cook, chief economist at the foreign exchange company, World First, said.

“This data will further increase market expectations that the Bank of England will not move on interest rates next year but instead will start to tighten monetary policy sooner. Short sterling contracts are now pricing in 2 25bps rate rises by the end of 2014 with SONIA contracts putting an 80% probability of a hike by September 2014. The market will not let the Bank of England anchor expectations of lower rates for longer without a fight.

“I still believe that the market is being overly presumptive and the rate of UK jobs growth will remain cautious through the next 12 months - and that rate hikes are likely in 2015 and not next year as many are expecting.

“The one piece of bad news was the worse than expected miss on earnings growth that only improved by 1.1% in July. Put that against inflation figures of over 2.5% and you can formulate real fears about the strength of a consumer spending led recovery, regardless of how broad based the recent growth numbers have been.”

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