The UK unemployment rate has dropped to its lowest since 1974 as more people dropped out of the workforce. However, the jobs boom may be peaking as vacancies are also falling.

The government said 3.6% of adults were out of work and looking for jobs in the three months through July, lower than the 3.8% pace in the previous months. Economists had expected no change.

In Scotland the unemployment rate fell from 3.3% to 3.1%.

Regular pay rises are still lagging the rising cost of living, according to the latest official figures from the Office for National Statistics.

Wages rose at an annual pace of 5.2% between May and July but they were outpaced by soaring prices.

Inflation – a measure of price rises – is at a 40 year high of 10.1% meaning the “real value” of pay is falling. The latest inflation figure is due out on Wednesday and is expected to show another rise.

The ONS data showed that the employment rate and number of vacancies also fell. The employment rate slipped to 75.4%, a small drop from the previous three-month period. Job vacancies fell by the most in two years, down 34,000 between June and August, although the overall number of vacancies still remains historically high.

“The jobs boom that began six months after the pandemic is probably coming to an end now,” said the boss of recruitment agency Reed.

Filling vacancies has been a serious issues since the easing of the pandemic the control on immigrant labour prompted by Brexit. Businesses have warned that the squeezed labour market is having a detrimental effect.

“With firms doing their best to keep afloat during a period of spiralling costs, they are also facing an extremely tight labour market which is further impacting their ability to invest and grow,” said Jane Gratton from the British Chambers of Commerce.