Unemployment 'to top three million'

Official data showed unemployment rising to 2.47 million in the three months to August, an increase of 88,000 on the quarter to May.

But worse lies ahead for the UK job market with public sector cuts and rising youth unemployment looming, said analysts.

"We think the fiscal squeeze could require around 750,000 job losses in the public sector - meaning that unemployment should easily surpass three million," said Vicky Redwood of Capital Economics.

School leavers and newly-qualified students are also set to enter the worst jobs market in a generation, said Howard Archer of IHS Global Insight. "Many of the school leavers who cannot get a job will still be unemployed next year when the next batch of school leavers emerge," he added.

The Office for National Statistics (ONS) figures showed a slight 1,000 fall in the jobless total to 2.469 million in the three months to August - fewer than the 2.47 million seen during the three months to July - although the ONS warns against comparing overlapping periods for technical reasons.

Unions, politicians and business leaders gave a cautious welcome to the figures while warning against complacency. TUC general secretary Brendan Barber said the figures gave "some cause for hope" but added: "The jobs crisis has not gone away and the economy remains very fragile."

The number of people claiming jobseeker's allowance in September increased by 20,800 to 1.63 million - the smallest rise since May 2008, the ONS said. Further signs that the labour market could be stabilising came from the number of vacancies, which have fallen in every period since April last year. These held firm at 434,000 in the three months to September. The jobless rate also remained stable month-on-month, at 7.9% - the first time it has stayed the same since since March last year - although it is 0.3% higher than in the three months to May.

Work and Pensions Secretary Yvette Cooper said: "Although unemployment isn't as high today as many feared it would be at the time of the Budget, it remains a serious problem which is why we must keep increasing support and advice to get people back into jobs."

But her Tory shadow Theresa May said: "Labour are now the party of unemployment with two-and-a-half million people unemployed, and one in five young people who can't find a job."