UNIONS and business leaders renewed their calls for fresh interest rate cuts after a sharp fall in earnings growth and a fall in unemployment.

TUC general secretary John Monks said the Bank of England could afford to be bold and cut rates next month after new figures showed average earnings increased by 2.7 per cent in the year to January, down by 0.7 per cent on the previous month.

Claimant count unemployment fell for the second consecutive month, confounding City forecasts of an increase.

However, manufacturing jobs continued to fall, down by 158,000 in the three months to January on the same period a year earlier.

The Government-preferred International Labour Organisation (ILO) jobless total, which includes people not eligible for benefit, rose by 8,000 over the quarter to January to more than 1.5 million.

Ian Fletcher, chief economist at the British Chamber of Commerce, said: "With price inflation back on track and wage inflation falling, there is certainly scope for the monetary policy committee to consider another interest rate cut in the months ahead."

The claimant count fell by 5,000 last month to 947,200, a jobless rate of 3.1 per cent, the second lowest figure since 1975, the Office for National Statistics reported.

Employment in the quarter to January rose by 23,000 to 28.2 million after a big increase in the number of women in work.

Work Minister Nick Brown said 127,000 more people were in employment compared to a year ago.

In the North-East, the number out of work rose by 1,000 to 89,000 in the three months to January. In Yorkshire and Humberside, it was 128,000, up 2,000 on the previous total.