UK jobless rate falls to 5.6%, lowest since 2008

Economists say fall in unemployment is still not feeding through to consumers in the form of higher wages

Britain's unemployment rate has dropped to its lowest level since 2008 but earnings growth has slowed, according to the final official labour market figures before the election.

The Conservatives welcomed news of the drop in the jobless rate to 5.6% as well as the number of people in work hitting a record of more than 31m.

The story of the UK labour market has long been a 'jobs-rich' but 'pay-poor' one. The latest numbers are no exception with good news for those looking for work, but less so for those already in employment.

The British economy is one of the brighter spots in the world economy at the moment, and that's confirmed by the IMF forecasts which show the UK as the second-fastest-growing economy in the G7 in the next two years, having been the fastest growing in 2014.

Those forecasts have been more than reinforced by the employment figures we saw this morning, which show a record number of people in work. They show the claimant count at its lowest level since 1975 and they confirm that under this government 2m jobs have been created. So the British economy is a job-creating machine.

The number of people in employment has risen to an all-time high, but the jobs boom and wider economic recovery are still not feeding through to households via higher wages.

The lack of wage growth leaves the economy vulnerable to setbacks, especially as growth has once again become all-too dependent on consumer spending, which is in turn reliant on low inflation.

With the jobless rate now only a fraction above its average of 5.3% seen in the decade before the recession, it is unsurprising that wage growth is gradually building.

Related: Why the British jobs recovery has not brought bulging pay packets

It's encouraging to see the momentum of the recent jobs recovery continuing into 2015, and to see real wage growth strengthen after a seven year squeeze.

But there is still a lot of ground to make up before we return to pre-crash pay levels. With inflation already at zero, this much-needed catch-up rests on far stronger nominal pay growth, underpinned by rising productivity.

The challenge over the longer term is to improve education and develop skills. But I would prefer to have a productivity problem than an unemployment problem.