Unemployment in the UK has fallen for the third month in a row, and wage growth has slowed down.

UK employment has grown steadily and unemployment has remained virtually unchanged

Nick Brown, Minister for Work

The number of claimants of unemployment benefit edged 200 lower to 946,000 - 3.1% of the workforce - the Office for National Statistics (ONS) said.

The figure is only marginally above the 27-year low recorded in February.

On the government's preferred Labour Force Survey measure, which includes those out of work but not claiming benefit, the jobless rate was 5.2% in the three months to August - the same as in the previous three months.

Bonus payments

But problems continued for the UK's manufacturers.

The labour market is not a source of inflationary pressure

Philip Shaw, Investec

The ONS said that the number of jobs in the manufacturing sector was, at 3.659 million, 163,000 lower than a year before.

In the economy overall, the number of jobs has increased by 211,000 to 28.5 million in the last year.

Normally a tight labour market would feed through into higher salaries, as employers competed for staff.

But average earnings growth slowed to 3.8% in the June to August period, compared with 3.9% in the three months to the end of July.

The ONS said this was because of the change in the timing of bonus payments to the financial sector.

Another factor was that public sector pay rises were lower than last year because a settlement to local authorities in July and August 2001 was not repeated this year.

No inflation worries

Minister for Work Nick Brown said the unemployment figures painted an encouraging picture.

"These are uncertain times for the global economy.

"But where other countries have had more difficulties, UK employment has grown steadily and unemployment has remained virtually unchanged."

The figures are unlikely to cause any concern among members of the Bank of England's interest rate committee.

"Average earnings are on the soft side - I imagine they will give some fillip to the rate cut camp," said Geoff Dicks, an economist at Royal Bank of Scotland.

Philip Shaw, chief economist at Investec agreed: "Overall, the labour market is not a source of inflationary pressure at the moment."