Britain recorded a surprise drop in the unemployment rate to 7.8 percent as the number of people working rose by 143,000, according to official statistics released Wednesday.
The market consensus had been that unemployment would remain at the 8 percent rate reported a month ago for the November-January period.
The report from the Office for National Statistics came a day after unexpected good news that consumer price inflation had fallen to 4.0 percent compared to a year ago from 4.4 percent.
The number of people counted as unemployed fell by 17,000, well above the consensus forecast of 3,000, in the three months ending in February.
Earnings excluding bonuses grew by 2.2 percent, short of the consensus prediction of 2.6 percent. The number of people with jobs, 29.23 million, is still 331,000 less than the pre-recession peak in 2008, the agency said.
"With pay growth still well below the rate of inflation, the continued squeeze on real pay suggests that the recent weakness of consumer spending is unlikely to let up any time soon," said Vicky Redwood, senior U.K. economist at Capital Economics.
The British Retail Consortium on Tuesday that sales in March were down 1.9 percent compared to a year earlier, the biggest drop in a data series going back to 1995.
Howard Archer, European economist for IHS Global Insight, said the lower than expected growth in earnings, combined with the fall in the inflation rate, boosts expectations that the Bank of England will keep its base lending rate at an all-time low of 0.5 percent "for some time to come."
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