The economy:

Crisis deepens for UK's young

One person in five in 16-to-24 age group is unemployed as record numbers to miss out on university places

Record numbers of A-level candidates are expected to end up without a university place today – as the latest unemployment numbers underline the bleak prospects of them finding a job.

More than one in five of Britain's young people (those aged 16 to 24) are out of work and almost 100,000 of them have been on the dole for two years or more.

The youth unemployment rate rose to 20.2 per cent this spring, according to the Office for National Statistics – one of the highest in the European Union.

There are 949,000 16 to 24-year-olds without work, a rise of 15,000 on the last quarter, and approaching levels last seen in the 1980s. Overall, unemployment rose by an unexpectedly high 39,000 in the three months to June this year, to top almost 2.5 million. The number of jobless women benefit claimants rose by 15,600 to 512,700, the highest since 1996.

The youth unemployment situation will be compounded by the number of teenagers who will not get into university this year. The number applying has reached an all-time high of 669,956 as candidates try to beat the rise in fees of up to £9,000 a year, coming in September 2012. Today's A-level results will likely see about 250,000 people chasing just over 40,000 places in clearing, meaning a record 210,000 will miss out. Many of them will face a dilemma over whether to hunt for scarce jobs, volunteer as unpaid interns, take gap years or seek university places overseas.

Sally Hunt, general secretary of the University and College Union, described the Government's fees policy as "a clumsy disaster".

The increase in youth unemployment is especially worrying because of the strong evidence that if young people can't establish themselves in the world of work early in their careers they will find it much more difficult later on – the "lost-generation" phenomenon that marked out the 1980s, when youth unemployment was even higher than today.

The jobs misery is not confined to the young. Reflecting the sharp rise in unemployment when the recession began in 2008, and the faltering recovery since then, the number of long-term unemployed – those without work for more than two years – is up 30 per cent. For those over 50, the rise is 38 per cent – suggesting that, as in previous downturns, many may simply never find work again.

Economists predict that general unemployment will see a further 250,000 out of work, and perhaps more, within months. The rate jumped from 7.7 per cent to 7.9 per cent, reversing recent declines. The more timely claimant count – which comprises those of the unemployed who are eligible for jobseekers allowance – jumped by 37,100 in July to 1,564,000.

Some of the rise in the number of jobless women benefit claimants was due to their being moved from other benefits on to jobseekers allowance as part of the Government's welfare reforms. However, the high proportion of females employed in the public sector suggests there may be more of this to come.

The official figures also understate the extent to which people can find work that they find suitable – hidden unemployment. As many as 1.26 million of those in work are in temporary and part-time jobs because they could not find a full-time position – the highest number since records began in 1992.

What may well be happening here is that skilled employees in the public sector – and before that in industrial jobs – are forced into casual labouring or bar work. While that keeps them engaged in the world of work and off jobseekers allowance, but represents a potentially vast waste of human skills.

Disappointingly for ministers anxious for the private sector to generate jobs to compensate for those being shed in the public sector – around half a million over the next five years – employment growth has virtually ground to a halt and the number of vacancies has fallen to recession levels.

There were 154,000 redundancies – a rise of more than a quarter. Although there are 250,000 more people in jobs than a year ago, that progress seems to have ground to a halt – just 25,000 more found themselves in work in the spring.

Of those, some 20,000 were temporary jobs and 4,000 part time, leaving only around 1,000 new full-time jobs.

The "rebalancing" of the economy seems to be stumbling along with the recovery; the latest survey data from business organisations suggests the manufacturing revival has run out of momentum, even as businesses complain about engineering skill shortages. The unemployment rate remained the highest in the north-east of England, at 10 per cent: in the south-east, especially in places such as Reading, Oxford and Cambridge, low unemployment is the rule – a regional rate of 5.8 per cent.

The fear is that the "labour hoarding" that occurred during the recession, where employers retained skilled workers for fear of losing them forever, and pay restraint helped to protect jobs, may now be coming to an end as employers conclude that the upturn won't come soon enough for them to justify keeping their staff on any longer.

By the same token British business is sitting on £60bn, waiting to be invested in new machinery, but which is not being spent because of weak confidence. This continues to undermine the Government "plans for growth", the next instalment of which is due with the Chancellor's autumn statement.

Case studies: 'Signing on for the first time was hard. People stank of booze'

Rosa McMahon, 22, of Norwich

Studied at the University of Birmingham from 2008 to 2011. She graduated with a 2:1 degree in politics and sociology

"I knew the job market was going to be difficult after graduating, so I worked hard and did all sorts of extra-curricular work to help me stand out, but I still find myself out of work. I have a supportive family - both financially and emotionally. But there's many who aren't so lucky. These days we're told you need a Masters, or work experience to get a job. But most Masters courses cost between £5,000 and £9,000, and as for work experience, it's often who you know and not what you know that gets you the place. As a student who was full of enthusiasm about life after the student party is over, I am left totally disillusioned."

James Boughey, 22, of Liverpool

Read music at King's College London. He graduated last year with a 2:1

"On a typical day I get up at 9am and do an online job search and application. At first I just looked for careers in arts, music and media. I got A*s at GCSE, 4As at A-level and a good degree – yet I didn't stand a chance. I tried for some graduate schemes. I always got through to the interview stage; after that it all goes quiet, and then you find you've been rejected. Signing on to the dole for the first time was hard. In the job centre there were people who didn't look ready for work – some even stank of booze. The advisers there don't know what to do with graduates."

Peter Miller, 32, of Dundee

Read politics and Spanish at Dundee. University and graduated with a 2:1, with an MSc at Trinity College, Dublin

"I left school without the grades for a good career but turned things around and got a place at university in my mid-20s. Back then I was working in a restaurant just to make my way. Now, after two degrees, I'm still working there. I want a job in politics and have done an internship at the European Parliament, but it was completely unpaid. It was a good experience, but a massive drain on my finances. I don't regret all the studying I've done though. It's still worth doing a degree. It's made me a more rounded person, with a more analytical mind. The job situation is hard, but I'm positive something will come along."

Tom Hughes, 21, of Croydon

Graduated last month from Brighton with a 2:1 in English Literature

"I moved home yesterday. I worked in a call centre for two weeks but couldn't afford the rent in Brighton so here I am. I'm sleeping on a sofa bed, living out of a suitcase. Not exactly what I had in mind after a three-year degree. I'm spending my days doing online job searches, and am thinking about signing on. I loved University, but I have to question whether it was worth it. I was studying something I loved but it hasn't been useful in finding a job. So many people have degrees now, you have to have all sorts of work experience to stand out. Maybe things will get better, but right now I've got £30 in my account, and it's not looking good."

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