The latest labour market statistics have shown unemployment falling by 8,300. The claimant count rate was at 3.0 per cent in December.

Forum Response: Institute of Directors

Graeme Leach, chief economist at the Institute of Directors said: "The chancellor must have smiled when he saw the latest labour market statistics showing falling unemployment and earnings growth. His smile probably widened when he saw that the fall in earnings growth was driven by a fallback in public sector earnings growth from 5.4 per cent to 4.8 per cent thereby alleviating some of the upward pressure on public expenditure".

Forum Response: Chartered Institute of Personnel and Development

John Philpott, chief economist at the CIPD, said: "The amount of work being undertaken in the UK economy each week dropped suddenly and sharply in the three months to November 2003 - down 7.1 million hours, or 0.8 per cent - despite the welcome news that unemployment is continuing to fall.

"A reduction in the average weekly hours of both full-time and part-time workers, combined with further falls in the number of employees in employment and slower growth in average earnings, indicates that the UK labour market was less tight at the end of last year than a glance at the headline jobs figures would imply.

"Assuming that employers have scope to increase hours of work as the economy recovers - which may to some extent depend on the aspirations of employees for a better work-life balance - serious wage pressure is unlikely to build in the early months of 2004.

"However, with unemployment low at the outset of recovery, conditions in the labour market look set to become a greater concern for the monetary policy committee later in the year, particularly if growth in labour productivity fails to pick-up."