Unemployment in the UK rose for the seventh month running in August but economists said the increases were getting smaller and suggested the labour market was stabilising.

The Office for National Statistics (ONS) said the number of jobless claiming benefits rose 1,600 last month, less than the 4,800 predicted by analysts.

July's increase was revised down by half to 1,400 and the jobless rate stayed at 2.8 per cent.

Annual earnings growth ticked up to 4.2 per cent in the three months to July but this was driven by higher bonuses.

Pay growth excluding bonuses slowed, suggesting underlying wage pressures remain muted despite the surge in energy costs.

"Taking these factors together we do not expect the Monetary Policy Committee (MPC) to change policy rates in the near future," said Robyn Barnett, economist at UBS.

The Bank of England's MPC held interest rates at 4.5 per cent last week after cutting them for the first time in two years in August to boost the economy.

Many analysts still expect a further cut in rates in the months ahead, pointing to huge layoffs announced by companies such as US computer giant Hewlett-Packard, but a run of recent strong data has made them less certain of a move soon.

"We acknowledge that the odds are increasing that it will be delayed until early 2006," said Howard Archer, economist at Global Insight.

The ONS said the pick-up in pay growth was because of higher bonus payments to real estate and food workers.

Earnings in July alone were up 4.4 per cent on the year, just below the 4.5 per cent threshold policymakers believe is compatible with stable inflation.

Excluding bonuses, annual earnings growth in the three months to July dipped to 3.9 per cent from 4 per cent.

"There are few signs that the tight labour market or higher oil prices are feeding into higher wages," said John Butler, UK economist at HSBC Markets. The UK government's preferred survey-based measure of unemployment also rose in the three months to July, by 12,000, for a rate of 4.7 per cent.