Official figures out just before George Osborne's fifth budget also show the unemployment rate held steady at 7.2%
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George Osborne got a welcome boost before presenting his budget with news that earnings are picking up and the number of people claiming jobless benefits is falling.
Official figures just hours before the chancellor's fifth budget showed the unemployment rate steady, at 7.2% in the three months to January, although younger people continued to be left behind, with one in five still out of work.
Average earnings were up 1.4% on a year ago, a bigger rise than the City had been expecting, and closing in on inflation, which is running at 1.9%. A pickup in wages will bring welcome relief to households after years of grappling with below-inflation rises. The numbers, which showed wage growth in January alone was 1.7%, will be welcomed by Osborne as he faces opposition criticism over the "cost of living crisis".
"At last we are seeing signs that the economic recovery is breathing life into the pay figures," said John Philpott, director of the Jobs Economist consultancy.
"It is now very likely that the average- real-pay squeeze will end in the coming months, with private sector workers set to enjoy real pay rises for the first time since 2009."
The Office for National Statistics said the number of people out of work and claiming jobless benefits fell by 34,600 in February: more than the forecast of 25,000 in a Reuters poll of economists.
But young people still appear to be largely missing out in the jobs market turnaround, with the youth unemployment rate at 19.8% – almost three times the UK's overall jobless rate.
David Kern, chief economist at the British Chambers of Commerce (BCC) noted that while the youth unemployment rate had edged down, it was still much higher than for other age groups.
"Overall, the jobs market is still improving and suggests that the recovery is making progress," he said. "Against this backdrop, in his budget speech we hope that the chancellor makes every effort to tackle youth unemployment while introducing measures to boost investment and exports."
There were also signs behind the headline employment figures that jobseekers of all ages are still finding it hard to get the kind of secure, full-time jobs they want. The ONS said the latest increase in employment was because there were more self-employed people; the number of employees had actually fallen.
"The economy is generating jobs but too many are insecure and poorly paid," said the TUC general secretary, Frances O'Grady.
But some economists said the pattern of rising self-employment could be a factor of the pickup in building work over recent months.
"It is not entirely clear whether this signals a softer labour market picture. With the construction sector booming, it is not a huge surprise self-employment is doing well," said David Tinsley, economist at BNP Paribas.
There were warnings this morning from the Bank of England that Britain's economic recovery is still far from secure.
Minutes from the Bank's latest monetary policy meeting showed its committee was unanimous in voting to keep interest rates at a record low of 0.5%, where they have been for five years.
Policymakers felt the recovery was becoming more balanced, however. The minutes said: "There were initial signs that the anticipated broadening from household to business spending might have already begun. Even so, there remained some way to go to ensure that the recovery was both balanced and sustainable."
The latest report on consumer confidence suggests households remain cautious about the recovery and their own finances.
Household spending rose to a three-month high in March, according to the data company Markit. The backdrop to higher spending was the lowest inflation perceptions among those surveyed since the end of 2009, and higher income from employment for a fourth month.
However, when asked about general financial wellbeing this month compared with a month earlier, respondents still felt worse off. The headline household finance index fell to 41.9 in March from 42.1 in February, where anything below 50 indicates contraction.
Tim Moore, senior economist at Markit, said: "March's survey was compiled just ahead of the UK budget, and it highlights that the squeeze on household finances is less acute than at almost any other time over the past five years."