The Bank of England received a glimmer of hope for the economy today with new figures showing average earnings rose less than expected in the three months to January while the number of people in employment reached a record high.

Muted earnings growth indicates that price pressures have not led to higher wage agreements at the beginning of the year, increasing the chances of an interest rate cut in April rather than May.

Earnings rose by 3.7 per cent between November and January, down from 3.8 per cent in the previous quarter, the Office for National Statistics said. Analysts were expecting a 3.8 per cent rise.

Earnings rose by just 3.5 per cent in January, the weakest growth since June 2007.

The ONS said the easing was due to lower growth in bonuses compared to this time last year.

Janet Henry, economist at HSBC, said: "The chances of the next Bank rate cut being delivered in April rather than our current forecast of May has sharply increased.

"The labour market data, and wage growth in particular, will remain critical to the pace of further rate reductions but this morning’s data moved in the right direction."

The number of people in employment rose by 166,000 to a 29.46 million in the three months to January, the highest figure since comparable records began in 1971. The unemployed claimant count fell for the 17th month in a row, to its lowest figure since June 1975.

The internationally comparable ILO unemployment rate in the three months to January was 5.2 per cent

The claimant count fell by 2,800 to 793,500 in February, its lowest level since June 1975.

But economists gave warning that it was too early for the Bank to take its eye off a potential increase in wages. Howard Archer, of Global Insight, an economic consultancy, said: "Unemployment is a lagging indicator and the smaller drop in claimant count unemployment in February could be an early sign that the labour market is just starting to be hit by slowing growth and weaker business confidence.

"We expect these factors to take an increasing toll on the labour market over the coming months."

Philip Shaw, economist at Investec, said: "Unemployment has fallen by less than expected on the claimant measure but broadly speaking the labour market situation is consistent with trends in previous months. In particular, average earnings growth remains very subdued despite high headline rates of inflation and the fact January is important for private sector wage settlements. The labour market is still not a threat.”

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive