Britain's unemployment rate has struck the lowest level for more than 41 years, official data showed on Wednesday as the country prepares to trigger its exit from the European Union.
Unemployment for the quarter ending January 31 fell to 4.7 percent from a rate of 4.8 percent in the final three months of 2016, the Office for National Statistics said in a statement.
"The unemployment rate dropped to 4.7 percent in the three months to January 2017... It has not been lower since June to August 1975," the ONS said.
Analysts' consensus forecast had been for an unchanged rate of 4.8 percent, which would have kept unemployment at an 11-year low point.
The official data painted a familiar picture of solid job growth but weak increases in income that have put a strain on many households since the financial crisis.
Pay growth, adjusted for inflation, halved to just 0.7 percent, the lowest since October 2014, which was shortly before inflation plunged to just below zero and made it easier for households to cope with slow pay growth.
But inflation is now rising again quickly, pushed up by the post-Brexit vote slump in the value of the pound. In January alone inflation-adjusted pay growth contracted by 0.2 percent, the first shrinkage since August 2014, the Office for National Statistics said.
The outlook for consumer spending is critical for Britain's economy as it begins the process of leaving the EU. Consumers kept up their spending after June's Brexit referendum shock but there have been signs that they are turning more wary.
The weakness in pay growth is likely to reassure the Bank of England that it should keep borrowing costs at their record low for longer, despite the pick-up in headline inflation.
The BoE, which is due to announce its interest rate decision for March on Thursday, is watching closely for any signs that rising inflation is feeding through into pay pressure.
Wednesday's data showed growth in pay including bonuses slipped to 2.2 percent in the three months to January, the weakest since the three months to April last year and worse than forecast in a Reuters poll of economists.
"The labor market is currently seeing decent improvement, reflecting the economy's resilience through the second half of 2016," Howard Archer, chief UK economist at IHS Markit, said in reaction to Wednesday's data.
"However, markedly slowing earnings growth reinforces the squeeze on consumers coming from rising inflation - and this is likely to increasingly weigh down on economic activity."
It comes as British Prime Minister Theresa May intends on starting the EU withdrawal process by the end of March.
Parliament this week approved a bill empowering the government to trigger Article 50 of the EU's Lisbon Treaty, starting a two-year countdown to Brexit.
"The labor market has been helped by the economy's extended resilience since June's Brexit vote, but mounting signs that consumers are starting to limit their spending fuels belief that 2017 will become increasingly difficult for the economy and for the jobs market," said Archer.
"The imminent triggering of Article 50 will bring likely difficult negotiations with the EU... Consequently, we see unemployment starting to edge up before too long and we suspect that the unemployment could reach 5.1 percent by the end of 2017," he added.
The Bank of England will be mindful of the mixed unemployment data ahead of its latest monetary policy announcements due Thursday.
Analysts widely expect the BoE to keep its main interest rate at a record-low 0.25 percent and make no changes to its cash-stimulus program aimed at supporting the UK economy during the Brexit process.
"The wage growth element is key for the Bank of England as weaker wage growth, which increased by only 2.2 percent year-on-year in January, could reduce pressures on the BoE to raise interest rates," said Kathleen Brooks, research director at City Index.
Across the Atlantic, the Federal Reserve is all but certain to announce a US interest rate hike Wednesday.
"All told, the combination of meagre wage growth despite very low unemployment supports the Monetary Policy Committee's view that enough slack remains in the labor market to warrant keeping rates on hold during the imminent period of high inflation," said Samuel Tombs, an economist at Pantheon Macroeconomics.
Sterling fell back below $1.22, halving the day's gains, and government bond prices rose as investors homed in on the implications of the weak wage growth figures for the BoE.
The BoE has said it expects unemployment could fall as low as 4.5 percent before it starts to push up inflation.
Economists have said they largely expect unemployment to rise this year as companies hold off from hiring while they wait for more clarity on the country's future ties to the EU.
The BoE said last month it expected a jobless rate of 5.0 percent in a year's time, although that was lower than its previous forecast of 5.5 percent.
While rising employment has been one of Britain's economic success stories over the last few years, new figures from the ONS showed almost a million people in work were on zero-hours contracts - jobs with no guarantee of work.
The number of workers on these contracts rose to 905,000 in the three months to December, up by 101,000 in the space of a year and representing almost 3 percent of people in employment.
The ONS says a record 4.8 million people are now also self-employed, up by 148,000 over the past year, representing 15.1 percent of the total workforce.