LONDON (Bloomberg) -- UK unemployment fell more than twice as much as forecast to the lowest since 1975 in November as the strength of the economy encouraged companies to take on more workers.

Claims for jobless benefits dropped 11,100 from October to 813,000, the Office for National Statistics said Wednesday in London. The median forecast in a Bloomberg News survey of 30 economists was for a decline of 5,000. The jobless rate, at 2.5 percent, matched a 32-year low.
Britain's economy will expand 3.2 percent in the fourth quarter, continuing the strongest growth streak in seven years, before a “sharp” slowdown next year, the Bank of England forecasts. The central bank trimmed its key lending rate last month, anticipating that a surge in market borrowing costs will trigger a slump in the UK and weaken the labor market.
“This suggests that the economy is robust and the credit crisis hasn’t had a severe impact on employment so far,” said Jeavon Lolay, an economist at Lloyds TSB Group Plc. in London. “We still see two rate cuts next year.”
Bank of England policy makers forecast economic growth of just above 3 percent this year, the fastest since 2004, and for that to slow to around 2 percent next year. They cut the benchmark rate a quarter point to 5.5 percent on Dec. 6 as a surge in credit costs stemming from the collapse of the U.S. sub-prime mortgage market showed signs of constraining expansion.
--------------------ILO unemployment
The unemployment rate as measured by International Labor Organization standards was 5.3 percent in the three months through October, the lowest since the first quarter of 2006. The rate compares with 7.2 percent in the 13-nation euro region, 4.7 percent in the U.S., and 4 percent in Japan.
“The UK data have held up well, but we see a sharp slowdown in 2008,” Sarah Hewin, a senior economist at American Express Bank in London, said in an interview. “Inflation is now above target and will stay there a few months, but we see it coming back down.”
The pound was little changed after the report, trading at $2.0434 as of 10:59 a.m. in London. Against the euro, the pound was at 71.915 pence after touching a four-year low last week.
Policymaker David Blanchflower said Nov. 29 there is a risk that unemployment may increase as economic growth slows and that there may be “hardship ahead” for Britons facing higher mortgage costs when lower fixed rates for their loans end.
---------------------Bonuses cut
London financial institutions may cut about 6,500 banking and fund-management jobs next year, and trim bonuses by 16 percent, as economic growth in the U.S. and China slows, the Centre for Economic and Business Research Ltd. said Oct. 8.
Members of the central bank's monetary policy committee have said they are watching salary agreements for signs that gains in consumer prices are getting entrenched in the economy. Inflation was 2.1 percent in October, above the 2 percent target for the first time in four months.
Policy makers’ economic forecasts assume “real take-home pay growth remains well contained, but grows more rapidly than it has over the past three years,” the bank said Nov. 14. Deputy Governor Rachel Lomax said Nov. 29 risks to inflation included the upcoming “big season of pay awards.”
Record migration, which swelled the workforce to a record 31.6 million in September, has still kept a lid on pay.
Average earnings including bonuses rose an annual 4 percent in the three months through October, down from 4.1 percent in the period through September, the statistics office said Wednesday. Without bonuses, wage growth slowed to 3.6 percent from 3.7 percent in the third quarter.
“The bank will be reassured that wage growth hasn't picked up,” said Lloyds TSB's Lolay. “Given that the labor market is tight, they must remain concerned about pay.”
The UK's Health and Safety Executive said on Dec. 10 it raised its pay for new nuclear safety inspectors to compete with other parts of the atomic energy industry, as it tries to hire staff to assess reactor designs that may be built in Britain.