The total officially out of work rose to 2.57 million in the three months to August, while unemployment among the under-25s hit a record 991,000.

The number of people out of work is at its highest since 1994, while the rate has jumped to 8.1%. David Cameron conceded it was "very disappointing," but refused to swerve from the Treasury's deficit reduction plan.  "I accept we've got to do more to get our economy moving, to get jobs for our people, but we mustn't abandon the plan that has given us record low interest rates."

For those workers who have a job, there is no relief from the squeeze on their living standards, according to the Office for National Statistics. Average wages, excluding bonuses, are rising at 1.8% – less than half the pace that inflation is rising.

Young people continued to bear the brunt of the labour market downturn. Their unemployment rate – at 21.3%, more than double the UK rate as a whole – is also the highest since such records began in 1992. Reflecting government cuts, the number of public sector employees fell 111,000 over the three months to June. The private sector failed to fulfil the government's hopes for it to pick up the slack, with just 41,000 more people joining the company payrolls in the same period.

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