U.K. employment rose to a record high in the three months through May after the economy created jobs at a stronger-than-expected pace. The number of people in work rose by 137,000, taking the employment rate to 75.7 percent, the highest since records began in 1971, the Office for National Statistics said Tuesday. Unemployment held at a 43-year low of 4.2 percent. Pay growth eased during the period, with wages excluding bonuses rising by 2.7 percent, as forecast. However, the slowdown may do little to ease concerns among Bank of England policy makers about inflationary pressures building in the labor market. Money markets are pricing in an about 80 percent chance of an interest-rate hike in August, a move also expected by more than 70 percent of economists in the latest Bloomberg survey. The pound rose following the labor-market data and was at $1.3261 as of 9:34 a.m. London time, up 0.2 percent on the day. The figures point to healthy demand for labor as the economy picked up from a snow-blighted first quarter. The number of vacancies rose to the highest since records began in 2001 and inactivity - those neither in work nor looking for a job - - dropped by 86,000 to an all-time low of 21 percent. \u201cIt\u2019s clear that the labor market is still growing strongly,\u201d said Matt Hughes, a senior statistician at the ONS. With wage growth running ahead of inflation, households are enjoying a return to real spending power after a year-long pay squeeze. They may not be out of the woods just yet though, with a report tomorrow forecast to show inflation picked up again in June. In May, private-sector pay growth picked up to 2.8 percent, but the public sector saw a slowdown. Unemployment fell to 4 percent in the month. Earnings growth including bonuses slowed to 2.5 percent between March and May.