The youth unemployment rate reached a record high of almost 20 per cent today as the jobless total continued to increase, although at a slower pace.
The number of people out of work increased by 30,000 between July and September to just under two and a half million.
Other figures showed that the number on jobseeker's allowance rose by 12,900 in October to 1.64 million, the 20th consecutive monthly increase, giving the worst total for 12 years.
The number of people classed as economically inactive, including those on long-term sick leave, looking after a relative or who have given up looking for work, reached a record high of eight million after a 41,000 increase over the latest quarter.
The inactivity rate is now over 21 per cent of the working age population and the total is the highest since records began in 1971.
Youth unemployment also continued to rise, with the number of 16 to 24-year-olds up by 15,000 to 943,000, giving a rate of 19.8 per cent, a record high.
The number of 18 to 24-year-olds out of work rose by 24,000 over the three months to 746,000, a rate of 18 per cent, the highest since 1992.
There was a small increase of 6,000 in the number of people in work to almost 29 million, the first quarterly rise since the summer of last year.
Full-time employment fell by 80,000 to 21 million, while part-time employment increased by 86,000 to a record high of 7.6 million.
The quarterly rise in unemployment was the smallest since spring last year.
Other data from the Office for National Statistics showed that job vacancies fell by 1,000 to 428,000 in the latest quarter, the lowest level since records began in 2001.
The number of people out of work for longer than a year increased by 71,000 in the three months to September to reach 618,000, the highest figure for 12 years.
But there was a 99,000 fall in the number of people out of work for longer than six months.
The 12,900 increase in the claimant count in October was the smallest monthly rise since April last year.
Average earnings increased by 1.2 per cent in the year to September, down by 0.4 per cent on the previous month.
Excluding bonuses, earnings growth fell by 0.1 per cent to 1.8%, the lowest since records began in 2001.
The Government welcomed the increase in employment and the slower than expected rise in the jobless total.
Ministers said the figures showed the Government's action on the economy was making a "real difference".
But they warned that "labour market difficulties" were still expected to continue for some time to come, with further rises in unemployment expected next year.
The Government today announced the next 35,000 jobs to be created for the young and long-term unemployed through the Future Jobs Fund - bringing the total to 95,000.
Ministers said most of the increase in 16 to 24-year-old unemployment was accounted for by a 14,000 rise in the number of full-time students who say they are looking for work.
Work and Pensions Secretary Yvette Cooper said: "The figures show more people in work and a lot more young people taking up our offer of full-time education and training, which is welcome news.
"The fact that unemployment is significantly lower than everyone forecast at the beginning of the year shows the support for the economy is making a real difference.
"But we know things are still tough for a lot of families, and unemployment is expected to increase further next year.
"That's why we're determined to do more with an extra 35,000 youth jobs, more apprenticeships and education places so we can guarantee no young person gets stuck in long-term unemployment."
The Government said today's figures reinforced the fact that the UK labour market was performing better than most major economies, showing UK unemployment at 7.8 per cent, compared to an EU average of 9.2 per cent and lower than 14 other EU countries including France (10 per cent), Ireland (13 per cent) and Spain (19.3 per cent), as well as the US (10.2 per cent) and Canada (8.6 per cent).
Employment Minister Jim Knight said: "When faced with the worst global recession since the 1930s, we made a decision to give jobseekers the support they need, investing £5 billion since last November in creating jobs, bringing in frontline advisers to Jobcentre Plus and expanding training and apprenticeships.
"Today's figures show that while there is still more to do, our investment is making a real difference to people's lives and ensuring that our labour market is performing well compared to other leading economies."
Paul Kenny, general secretary of the GMB union, said: "These figures show what a dismally bleak landscape there is for the jobless and their families as Christmas approaches, particularly for the young workers struggling to get into the labour market.
"If, as seems likely, the financial elite who caused this recession and its attendant havoc resume skimming their multimillion bonuses, anger will boil over.
"In the forthcoming pre-budget report the Government must not fail to take pre-emptive action to stop the financial elite adding insult to injury to those who are paying the price for their recklessness."
Unemployment in the regions between July and September was:
Region, Total unemployed, Change on quarter, Unemployment rate
North East, 119,000, minus 2,000, 9.5%
North West, 294,000, plus 4,000, 8.6%
Yorkshire/Humber, 227,000, minus 4,000, 8.7%
East Midlands, 173,000, plus 5,000, 7.5%
West Midlands, 270,000, minus 14,000, 10.0%
East, 194,000, no change, 6.5%
London, 367,000, plus 8,000, 9.0%
South East, 265,000, plus 4,000, 6.0%
South West, 176,000, plus 5,000, 6.6%
Wales, 125,000, plus 14,000, 8.7%
Scotland, 194,000, plus 4,000, 7.2%
N Ireland, 58,000, plus 4,000, 7.2%