Unemployment fell in Britain by 16,000 last month, but the number of "economically inactive" people increased to almost eight million in the three months to July.
Figures from the Office for National Statistics show that the number of those unemployed fell to 1.41 million.
The number of people claiming unemployment benefit also fell by 6,100 last month to 830,200, a claimant count rate of 2.7 per cent, the lowest level since comparable records began in April 1975.
The unemployment rate for the quarter to July was 4.7 per cent - a drop of 0.1 per cent on the previous quarter, but a fall of 0.3 per cent over the year.
The overall employment level was 28.3 million in the three months to July 2004, down 1,000 from the previous quarter but up 179,000 on the same three months last year.
However the number of people employed in manufacturing continued to decline, falling 93,000 to 3.3 million in the three months to July.
But over the same period, the number of economically inactive people – the long-term sick and disabled, those who have taken early retirement as well as those who have simply stopped looking for work, increased by 73,000 to 7.88 million.
Average earnings, including bonuses, increased by 3.8 per cent in the year to July, down 0.5 percent from the previous month. The growth was the weakest since December 2003.