The UK unemployment rate has fallen to 6.5%, its lowest rate since 2008 and two years before Bank of England Governor Mark Carney had targeted this level.
However, pay growth has also lagged inflation, according to the fresh data from the Office for National Statistics, which economists believe may imply that the labour market is not a source of inflationary pressure and so reduces the need for Carney's Monetary Policy Committee (MPC) to raise interest rates in coming months.
In the single month of May 2014 the UK unemployment rate fell to 6.2%, with the headline figure for the three months to May showing a rate of 6.5%, down slightly from 6.6% in the period to April thanks to a 254,000 increase in employment.
Economist David Tinsley at BNP Paribas noted that the driver for the improvement was that, in contrast to trends over the previous six months, full-time employees were now forming the predominant driver of the rise in jobs, with numbers of full-timers rising 1.1%.
With plenty of spare capacity still apparent in the labour market, pay growth is being prevented from picking up and is lagging behind inflation.
Pay including bonuses rose only 0.3% year on year, slowing from the 0.8% in April and down markedly from the rate of 1.8% a year ago.
The rate of pay growth excluding bonuses fell from 0.9% to just 0.7% in May - the lowest rate on record.
"This weakness partly reflects the fact that bonuses in April and May 2013 were unusually high, since many workers had delayed taking income until after April's cut in the additional rate of income tax," said Sam Tombs at Capital Economics.
But he observed that it was an "unusual mixture" of strong employment growth but stagnant wages.
He said a 36,300 monthly fall in the more recent claimant count measure of unemployment in June, alongside the strength of the latest employment surveys, suggests that the unemployment rate has probably fallen further since.
"So with few signs that the labour market is a source of inflationary pressure, there remains no pressing need for the MPC to raise interest rates this year."
Brenda Kelly at IG agreed, saying that earnings growth below expectations meant Carney can still point out enough reasons why "not now, but eventually" is still his mantra on UK interest rates.
However, Howard Archer at IHS Global Insight said the rapidly tightening labour market also will maintain concerns about UK productivity, which would seemingly boost the case for an early raising of interest rates by the Bank of England.
Similarly, BNP's Tinsley noted the rising full-time average hours, up 0.6%, and total weekly hours for all workers very strong and up 1.4% over the three months to May. "The flip side to that is productivity per hour is still very weak."
But he concluded: "While some of the media headlines will focus on the renewed decline in average real pay growth, given weak pay and inflation at 1.9%, this should not obscure from the fact in the absence of a pick-up in productivity growth the current conjuncture is about as good as it gets. For monetary policy the signs that the labour market is heading nearer capacity is further sign that a footstep on the road to normalisation can not be delayed for too long."