UK unemployment falls by 32,000

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UK unemployment fell by 32,000 to 1.61m in the three months to the end of January, government figures show.

The Office for National Statistics (ONS) said the number of people claiming jobseeker's allowance in February also fell by 2,800.

Average earnings rose at an annual rate of 3.7% in January, down slightly.

Economists have been closely watching the unemployment data, to see if the effects of the credit crunch are being passed on to the broader economy.

"Broadly speaking the labour market situation is consistent with trends in previous months," said Philip Shaw, Chief Economist, at Investec.

"In particularly average earnings growth remains very subdued despite high headline rates of inflation. The labour market is still not a threat." he added.

The Bank of England has been reluctant to cut rates as aggresively as the US Federal Reserve because it is worried about rising inflation.

Food and fuel prices have been driving up the headline inflation rate.

But Wednesday's jobs report shows that pay increases remain subdued, despite rising living costs.