U.K. jobless claims unexpectedly fell in July and a wider measure of unemployment dropped to its lowest in a year as the Olympic Games created jobs, showing the labor market’s resilience in the face of deepening recession.

Jobless-benefit claims fell 5,900 to 1.59 million, the Office for National Statistics said in London. The median forecast of 29 economists in a Bloomberg News Survey was for a gain of 6,000. The jobless total measured by International Labor Organization methods fell to 8 percent in the second quarter from 8.1 percent in the three months through May.

The willingness of companies to keep hiring workers when the economy is shrinking has provided a boost for Prime Minister David Cameron and perplexed economists. Some say the improvement is unsustainable and unemployment may rise in coming months.

“It might be difficult to sustain these strong trends,” said Nida Ali, an economist at Ernst & Young’s ITEM Club in London. “Activity in the second half of 2012 is expected to remain sluggish, implying that the private sector will find it increasingly difficult to create jobs.”

Britain’s economy shrank 0.7 percent in the three months through June, the third straight quarter of contraction. The the Bank of England sees the economy contracting about 0.2 percent this year, according to figures published Wednesday.

Separately, minutes of the Bank of England’s Aug. 1-2 meeting showed policy makers voted unanimously to keep their bond-purchase target unchanged this month. They said they will assess the need for other measures in light of the impact of their new credit-boosting program.

Payrolls Increase

The number of people in work climbed 201,000 to a four-year high of 29.5 million in the second quarter, the biggest increase since 2010, the statistics office said. There were gains in both full-time and part-time employment. London accounted for half of the increase, partly reflecting hiring for the Olympics that closed Aug. 12.

Unemployment in the period fell by 46,000 to 2.56 million, the second straight quarter of decline. London made up 42,000 of the drop. Of the fall in jobless claims last month, the British capital accounted for 2,800, or almost a half.

The pound rose against the dollar after the report and was trading at $1.5688 as of 10:55 a.m. in London, up 0.1 percent on the day. U.K. government bonds stayed lower, with the yield on the 10-year gilt climbing 3 basis points to 1.63 percent.

‘Genuine Puzzle’

The statistics office said that without cuts to lone-parent benefits, which pushed more women onto the jobless roll, the claimant count would have fallen by even more in July. The report showed that the unemployment claims rate was unchanged at 4.9 percent last month. In June, claims rose by 1,000 instead of the 6,100 initially reported.

Britain’s 8 percent unemployment rate compares with 11.2 percent in the euro region, 8.3 percent in the U.S. and 4.3 percent in Japan.

Typically, the labor market is slow to respond to economic downturns as companies hoard skilled workers in case the weakness proves short lived. Still, economists are at a loss to explain why the economy continues to create jobs after three consecutive quarters of shrinking output. Bank of England Deputy Governor Charles Bean last week described the resulting loss of productivity as a “genuine economic puzzle.”

“More questions will no doubt be asked about why employment has been so strong,” said George Buckley, an economist at Deutsche Bank AG in London. The data sit “uncomfortably with three quarters of economic contraction. We may see weaker jobs data in the second half.”

Australian Confidence

Elsewhere, Australian consumer confidence fell the most in five months in August, with an index of sentiment by Westpac Banking Corp. and Melbourne Institute dropping 2.5 percent to 96.6. A government report showed the wage-price index, which measures hourly pay rates excluding bonuses, rose 3.7 percent in the second quarter from 12 months earlier.

The mixed signals on the economy come as the nation’s central bank weighs whether to hold interest rates at a developed-world high.

The Reserve Bank of Australia, which lowered interest rates by 1.25 percentage points from November to June to 3.5 percent and paused at the past two meetings, has indicated wages need to remain contained and productivity improve to ensure inflation stays within its target of 2 percent to 3 percent.

Malaysia’s Economy

In Asia, Malaysia’s economic expansion unexpectedly accelerated in the second quarter as manufacturing and consumption climbed. Gross domestic product rose 5.4 percent from a year earlier, after expanding a revised 4.9 in the previous quarter, Bank Negara Malaysia said. Economists forecast a 4.6 percent expansion.

Later, a U.S., Federal Reserve report is projected to show output at factories, mines and utilities increased 0.5 percent in July, according to a Bloomberg survey. A separate report will show the cost of living rose in July for the first time in four months. The projected 0.2 percent gain in the consumer-price index follows no change in June.

Today’s U.K. figures also underlined the squeeze on household incomes as average earnings rose just 1.6 percent in the second quarter from a year earlier, while inflation accelerated to 2.6 percent in July. Excluding bonuses, pay growth was unchanged at 1.8 percent.

Monthly figures prepared on an experimental basis show ILO- based unemployment falling to 2.51 million in June from 2.59 million in May.