Unemployment in Britain has dropped to its lowest rate in almost a decade but persistently weak pay growth has bolstered the case for the Bank of England to hold interest rates at their record lows.

The jobless rate fell from 5.2 to 5.1 per cent in the three months to November, the lowest since 2006, long before the financial crisis hit.

The official figures underscore how much the labour market has healed. Joblessness peaked at 8.5 per cent in 2011 and has dropped more quickly than anyone expected, in spite of an uneven economic recovery.

Meanwhile, the employment rate has climbed to a fresh high of 74 per cent or 31.4m people, and most of the newly created jobs were “traditional” full-time employee roles.

“The UK economy continues to be a remarkable job-creating machine,” said John Hawksworth, chief economist at PwC. George Osborne, the chancellor, hailed the figures as an “important milestone on the road to full employment”.

The news will bring little cheer to the beleaguered steel industry after a bad week, however, with Tata — Britain’s biggest producer — announcing 1,050 job cuts and Sheffield Forgemasters, the last British independent steelmaker, shedding up to 100 workers.

The IPPR think-tank has said a further 1,700 jobs could now be lost in the supply chain with maintenance workers, iron suppliers and machinery manufacturers all losing business.

The jobs figures contrast with other data that suggest Britain’s economy is slowing. This implies productivity — the amount of economic output each worker produces per hour — has weakened again after a slight revival last year.

At the same time, wage growth has been sluggish — one key reason the BoE has chosen not to follow the example of the US Federal Reserve by raising interest rates. On Tuesday Mark Carney, the BoE’s governor, said the economy was not yet strong enough for higher rates.

In the three months to November, average annual pay growth slowed from 2.4 per cent to 2 per cent. Excluding bonuses, pay growth was 1.9 per cent — down from 2 per cent.

The figures for the single month of November, which the Office for National Statistics warned could be volatile, showed a slight improvement from October.

Nonetheless, economists said wage pressures were far too weak to prompt the BoE to raise rates. In the pre-crisis period, nominal wage growth was typically twice as fast as it is now.

“There still seems very little inflationary pressure coming from the labour market … suggesting that an interest rate hike is still some way off,” said Ruth Miller, an economist at Capital Economics, in a note to her clients.

James Knightley, an economist at ING, agreed. “With Mark Carney suggesting there is little appetite for a rate hike any time soon, and with the prospect of a Brexit vote set to weigh on activity, it looks as though November remains the earliest possible opportunity for a rate rise,” he said.

Economists are puzzled by the slowdown in wage growth, since pay usually accelerates when unemployment is low and labour is relatively scarce. Mr Carney offered four potential explanations for weak pay in his speech on Tuesday.

First, he said the average could have been skewed lower by the entry of more young people, who tend to be paid less, into the labour market.

He also said people were working fewer hours each week as the labour market normalised.

Third, he said, the “natural” rate of unemployment — the rate that starts to generate inflationary pressure — could be lower than anyone had previously thought. The BoE has previously estimated the “natural” rate to be about 5.1 per cent, but that milestone has been reached.

Finally, he suggested employers might not be under pressure to raise wages because inflation was close to zero, which means workers were enjoying a boost to living standards in any case.

Not everyone agrees with Mr Carney’s dovish assessment. Samuel Tombs, an economist at Pantheon Macroeconomics, predicted the BoE would be forced to raise rates sooner than most people expect.

“With the labour market now extremely tight and the National Living Wage set to be introduced in April, the first half of 2016 likely will see a renewed acceleration in wages, bringing interest rate hikes swiftly back into focus,” he said.