Office for National Statistics data showed a mixed picture for the UK labour market, with unemployment falling but signs of weaker hiring and wage growth slowing to the lowest in over five years.
The unemployment rate dropped to 4.9% in February from 5.2% in January, below expectations, while employment rose by 24,000 over the three months.
However, payrolled employment fell by 11,000 in March following a decline in February, pointing to softer demand for workers.
Vacancies also fell 8.3%, reaching their lowest level since lockdown restrictions in 2021.
Wage growth continued to ease, with average earnings excluding bonuses rising 3.6% year-on-year, the slowest pace in more than five years.
Liz McKeown, director of economic statistics at the ONS, said with unemployment also falling, the number of vacancies per unemployed person remains broadly unchanged.
"Alongside falling unemployment, the number of people not actively seeking work increased, with data suggesting fewer students seeking work alongside their studies."
Economists said the data sends mixed signals for policymakers at the Bank of England, but there was little market reaction.
Rob Wood at Pantheon Macroeconomics said the fall in unemployment was a surprise and could limit the scope for rate cuts, particularly if oil prices remain elevated.
The labour market loosening less than feared in the months leading up to the Iran war "will limit the number of MPC rate cuts that are possible if oil prices fall back, and tip the balance towards rate hikes if oil prices stay high", he said.
But the data was mixed, he added, with payroll data "likely" to be revised to be nearly flat in March. "The big surprise was a drop in unemployment, which the MPC had turned their focus to in February."
However, James Smith at ING said the drop appeared to be driven by a spike in "economic inactivity" as opposed to a rise in employment.
"And more importantly, it is likely to rise again as the energy crisis takes its toll on Britain's jobs market. That's why we don't currently expect the Bank of England to hike rates this year," he said.
Simon French at Panmure Liberum said: "From an inflation standpoint, the fall in wage growth to 3.6% year-on-year is probably the most significant data, and will – at the margin – encourage the BoE to sit tight on UK Bank Rate at next week’s meeting."