The number of unemployed people in the UK rose by another 164,000 between June and August, to 1.79 million, according to the latest government figures.
The rise took the official unemployment rate to 5.7% from 5.2% in the previous quarter.
The Office for National Statistics (ONS) said the increases in both the unemployment rate and level were the largest since the early 1990s.
Jobseeker’s allowance claimants rose by 31,800 to 939,900 in September, up 104,900 over the year.
The ONS stated that: ‘Although employment has fallen over the quarter, total hours worked remained unchanged at 944.2 million.
‘This reflects an increase in average hours worked per week, particularly by women in full-time employment.’
The ONS added: ‘The annual rate of growth in average earnings excluding bonuses was 3.6% in the three months to August 2008, down 0.1 from the three months to July. Including bonuses, it was 3.4%, down 0.1 from the three months to July.’
Meanwhile, the Chartered Institute of Personnel and Development said its surveys suggested unemployment will reach 2m by this Xmas and 3m by next Xmas.
GMB General Secretary Paul Kenny commented on the unemployment figures. ‘Now is not the time for faint hearts. The government should use public spending to create jobs on projects like Crossrail and other transport infrastructure, on social housing schemes, and ships and aircraft for the armed forces.
‘There is also need to get on with building nuclear power stations and developing green jobs for wind and wave power.
‘This spending will keep people in work and boost confidence and is just as necessary as the bail-out of the banks.’
TUC general secretary Brendan Barber said unemployed people ‘will need all the help they can get with redundancy pay, re-training and personal advice.’
The TUC called for an increase in statutory minimum redundancy pay.
Barber said the government should drop its work-for-dole plans, which he said were based on ‘blame-the-victim attitudes’.
The Public and Commercial Services Union (PCS) expressed ‘deep concern’ over the sharp rise in unemployment and reports that up to 10,000 jobs will be cut in the Ministry of Justice (MoJ).
The PCS urged the government to reverse its decision to cut another 12,000 jobs in the Department for Work and Pensions (DWP) by 2011.
It noted that 30,000 jobs have already gone in the DWP over the last three years leaving little or no capacity to deal with the increase in unemployment.
PCS general secretary Mark Serwotka said: ‘The bail-out of the banks shouldn’t be at the expense of public services.’
Unite joint general secretary, Derek Simpson said: ‘The government has a role to play in increasing public spending, creating jobs and generating confidence. . . Thatcher buried Keynesian economics and the current crisis shows just how wrong she was. It’s time to resurrect John Maynard Keynes and kick-start the economy.’
• Second news story
COUNCILS IN CRISIS-STOCK MARKETS CRASH
The government yesterday sent financial ‘task forces’ into three unnamed councils who face severe ‘short term difficulties’ after investing in failed Iceland banks.
A statement issued following a meeting between local government minister John Healy and the Local Government Association said: ‘Thirteen councils have said they may face short term difficulties but we have no reason to think that wages will not be paid or that services could be at risk at these Authorities.
‘Financial experts will be working with three of these councils from today and will report interim findings shortly.’
Specialists are contacting the other 10 councils to offer support.
Over 116 councils have invested a total of £858m in Icelandic banks.
The news came as EU leaders were meeting in Brussels for a summit devoted to the financial turmoil.
The European Commission proposed lifting the state guarantee on bank deposits to 100,000 euros.
By mid-afternoon the FTSE 100 was down 262 points or 5.8%, at 4131 points, with share in HBOS slumping 39%. Lloyds TSB rose 6.5% on reports the government would allow the bank to pay dividends while still taking part in the £37bn rescue scheme.
In New York the key Dow Jones Industrial index was over 313 points or 3.36% down at 8997 an hour after opening.
German share prices opened lower, with the Dax index 293 points or 5.65% down by 3.30pm at 4905 points, and France’s main Cac 40 index was down 190 points at 3483, over 5% down.
The FTSE 100 closed at 4079.6 points, 314.6 points (7.16%) down.