The latest Office for National Statistics labour market data (covering the three months to the end of March) shows that employment increased by 122,000 and unemployment fell by 53,000.

However, the number of people claiming unemployment benefit rose by a larger-than-expected 19,400 to 793,000, while wage growth fell behind inflation for the first time since 2014, despite the unemployment rate falling to a 42-year low.

The worse-than-expected earnings figure means that real-terms pay — adjusted for inflation — fell by 0.2%. These figures were released a day after the ONS said that inflation had risen to 2.7%.

Commenting on the data, CBI principal economist Alpesh Paleja said: “Rising employment continues to reinforce the importance of the UK’s flexible labour market, but weakening productivity and slower pay growth, coupled with rising inflation, will continue to squeeze household earnings.

“Therefore, maintaining the UK’s reputation as a great place to do business — for example, by increasing R&D spend to 3% of GDP by 2025 — will help to boost the UK’s productivity. This is the only sustainable route to higher wages and better living standards.”

Ben Brettell, senior economist at financial-services group Hargreaves Lansdown (pictured), said: “The economy has surprised on the upside since last summer’s referendum. The strength of employment is one reason to be optimistic that the slowdown in business and consumer spending won’t be too severe.”

However, a report published last week by the EY Item Club forecasts that the jobless rate will rise from about 4.7% this year to 5.4% in 2018 and 5.8% in 2019. It says that a slowing supply of jobs is behind this forecast, as employers adjust to a tightening labour market by making greater use of existing staff.

Martin Beck, senior economic adviser to the EY Item Club, said: “The UK labour market may be starting to become a victim of its own success.

“As the proportion of people in work has climbed ever higher, firms may have found it more difficult to fill vacancies, resulting in greater utilisation of the existing workforce and slower jobs growth.

“On a positive note, slower growth in the workforce may deliver a boost to what has been a long period of insipid productivity growth.

“With the flow of potential workers slowing, firms are likely to have more incentive to invest in improving efficiency or in labour-saving technology.”