Jobless figure highest for 10 years

Experts warned there was worse to come, with a grim prediction that the jobless total could hit two million next year.

There were 1.72 million people out of work in the three months to July, up by 81,000 from the previous quarter and the highest total since the spring of 1999.

The number of people claiming jobseeker's allowance rose for the seventh month in a row in August, by 32,500 to 904,900 - the biggest monthly hike since December 1992.

The Office for National Statistics said the trend on both the claimant count and the wider number of jobless was increasing.

Employment Minister Stephen Timms maintained that the UK labour market remained "resilient", adding: "Like other countries, the UK is dealing with global economic challenges and unemployment rose last month.

"There are 333,000 more people in work than a year ago, and over 600,000 vacancies, with 10,000 new vacancies being notified to Jobcentre Plus each day."

But union leaders called for urgent action, including a cut in interest rates, with the TUC saying it was "very likely" that total unemployment will reach two million during 2009.

TUC general secretary Brendan Barber said: "It is more important than ever that we have a co-ordinated economic response to the downturn that puts more money into the pockets of middle and low-income families.

"At the same time the Bank of England must play its part. It is clear that deflation is a much more pressing threat than inflation, and interest rates should be cut."