BRITAIN'S "strong" labour market has seen employment jump to record levels despite households feeling the pinch as wage growth lags behind inflation.

The Office for National Statistics said the number of people in work across the UK reached another all-time high, climbing by 181,000 to 32.13 million between May and July.

The employment rate also rose by 0.5 per cent to a record high of 75.3 per cent on the quarter.

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In Scotland, the jobless total fell by 7,000 in the three months to July, to stand at 102,000.

The unemployment rate fell by 0.3 per cent from the previous quarter to reach 3.8 per cent, lower than the UK figure of 4.3 per cent.

The number of people in work north of the border rose by 60,000 to 2,587,000.

Stuart McIntyre from the Fraser of Allander economic research institute said the headline indicators showed the Scottish labour market continued to be "in good health".

He noted how the 3.8 per cent jobless rate was lower than the UK's and among the lowest of any part of the country.

Meanwhile, annual growth in earnings remained static at 2.1 per cent, both including and excluding bonuses over the period.

Once inflation is taken into account, total and regular pay both slipped by 0.4 per cent.

It comes as official inflation data published on Tuesday showed the pay squeeze on cash-strapped households had intensified, with the cost of living rebounding to 2.9 per cent in August, from 2.6 per cent in both June and July.

Matt Hughes, senior ONS statistician, said: "Another record high employment rate and record low inactivity rate suggest the labour market continues to be strong.

"In particular, the number of people aged 16 to 64 not in the labour force because they are looking after family or home is the lowest since records began, at less than 2.1m.

"Despite earnings rising by 2.1 per cent in cash terms over the last year, the real value of people's earnings is down 0.4 per cent."

The jobs market continued to shine for the economy, with UK unemployment tumbling by 75,000 to a 12-year low of 1.46m between May and July.

The unemployment rate UKwide dropped over the period, easing back by 0.2 per cent to the 4.3 per cent level, the lowest since 1975.

Focusing on economic inactivity, the rate hit a record low by falling 0.3 per cent over the quarter to 21.2 per cent.

Elsewhere, the so-called claimant count dropped by 2,800 to 806,300 last month.