Unemployment has fallen by 20,000, but the number of people out of work for longer than a year has risen to its highest total in 13 years, new figures showed today.
The numbers claiming Jobseeker's Allowance increased by 5,300 in September to 1.47 million, the second consecutive monthly rise, according to the Office for National Statistics.
Total unemployment, including those not eligible for benefit, fell to 2.45 million in the three months to August, the lowest so far this year.
This was almost entirely due to 16 and 17-year-olds finding work, training or education.
Female unemployment increased by 36,000 over the latest quarter to just over a million, while the number of vacancies across the economy was 30,000 down in the three months to September to 459,000, the biggest quarterly reduction since the start of 2009.
The number of people out of work for over a year was 821,000 in the quarter to August, up by 27,000 from the previous three months, reaching the highest total since early 1997.
Jobless 18 to 24-year-olds increased by 35,000 to 742,000, the highest for a year.
Meanwhile, the number of people in work increased by 178,000 to 29.16 million, the best figure for a year.
Employment is up by 241,000 on the year but is still 270,000 lower than before the start of the recession.
The latest unemployment rate is 7.7%, a fall of 0.1% on the quarter, while the claimant count rate remained at 4.5%.
There were 9.28 million people classed as economically inactive in the quarter to August, down by 66,000, largely because of a fall in the number of students counted in the figure.
The number of workers in part-time jobs reached a record high of almost eight million, while self-employment also grew to a new record of almost four million.
Average earnings increased by 1.7% in the year to August, up by 0.4% on the previous month, giving average weekly earnings of £451.
Employment minister Chris Grayling said: "Another rise in employment is a step in the right direction but clearly our priority is to get the economy motoring again, reduce the deficit and make the UK an attractive place for investment to encourage growth.
"We are pressing ahead with radically overhauling the welfare system, with reassessments of those on incapacity benefits in Burnley and Aberdeen beginning this week.
From early next year our Work Programme will come into force to ensure that long-term unemployed people and others who need it have tailored support to move them into sustained work."
The Government said the UK economy still faced "significant challenges" ahead and it must continue to tackle the deficit and create an environment where businesses can flourish and create jobs.
The increase in the number claiming Jobseeker's Allowance this month showed that the Government was right to press ahead with its new Work Programme, said Mr Grayling.
Vicky Redwood, senior economist at Capital Economics, said the figures provided further evidence that the labour market recovery is faltering, even before the public sector job cuts begin.
She said: "The 5,300 rise in claimant count unemployment in September was the second monthly increase in a row and, although small, suggests that the trend has turned.
"Admittedly, employment still rose strongly, by 178,000 in the three months to August. But this was a smaller rise than in the previous couple of months and the more forward-looking employment surveys have by and large been weakening."
Howard Archer, chief UK and European economist at IHS Global Insight, said he also expected a deteriorating trend to emerge.
"We suspect that unemployment is headed up over the coming months as a consequence of slower, below-trend growth, rising business caution and public sector jobs being increasingly pared.
"Specifically, we see unemployment on the ILO measure peaking around 2.85 million in the first half of 2012, with the unemployment rate reaching 9%," he said.
Dave Prentis, general secretary of Unison, said: "This is the false calm before the storm. Next week the Chancellor will lay the groundwork for adding 750,000 public sector workers to the dole queues. The knock-on effects to the private sector will be huge.
"The Chancellor must return to the drawing board. His plans will wreak havoc with the recovery and drag the country back into recession. Millions will be condemned to long term unemployment and there will be no private sector jobs for those who have lost their public sector jobs - both sectors will meet each other in the dole queues.
"It is a disgrace that the Chancellor is ploughing ahead with his damaging plans when there are real alternatives. Clamping down on the tax dodgers, taking action on the tax havens, and getting the banks to pay their fair share towards the recovery by imposing a Robin Hood tax would raise billions."
David Kern, chief economist at the British Chambers of Commerce, said: "These figures are slightly better than expected. However, there are also some negative features. The recent increases in total employment were mainly driven by part-time workers, the number of which has increased to its highest level since records began in 1992. Furthermore, the number of people working part-time because they could not find a full-time job is also at a record high.
"While recent labour market trends are welcome, we have not yet seen the negative impact on jobs that will result from the tough but necessary deficit-cutting measures that will be implemented over the next few years.
"On the basis of these figures we reiterate the BCC's forecast that UK unemployment is likely to record a further net increase of some 200,000 over the next 18 months, reaching a peak of around 2.65 million in the first half of 2012."
TUC general secretary Brendan Barber said: "Today's figures show the labour market is on the turn despite strong growth earlier in the year. We could be seeing the start of a second wave of rising unemployment, with women and young people already reeling from the cuts.
"Female unemployment has been rising for over a year and is now over a million. With hundreds of thousands of jobs set to go in the female-dominated public sector, women look likely to suffer rising joblessness for some time to come.
"The job prospects for young people are equally grim. Youth unemployment increased by 14,000 in August alone and over 200,000 18- to 24-year-olds have now been out of work for over a year.
"Instead of fighting internal departmental battles over the costs of welfare schemes that will come into effect years down the line, the Government needs to focus on helping the millions desperate for a job now."
Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, said: "Today's headline employment and unemployment figures may still look healthy but these include the tail end of the improvement in demand for labour witnessed in the spring and summer. Forward looking business surveys of employers' hiring intentions indicate that this improvement was temporary and that conditions in the labour market are weakening.
"The rise in claimant unemployment of 5,300 in September is higher than expected and suggests an accelerating upward trend. Most disappointing is that the latest monthly increase is comprised of both more people joining the dole and fewer leaving.
"More worrying still is a sharp drop in vacancies in the three months ending in September. The number of vacancies is falling back to that last seen at the end of 2009, with a particularly marked fall in vacancies in public administration and education, suggesting this year's freeze on public sector recruitment is hitting public sector job prospects ahead of the major cuts due to be announced by the coalition Government next week."
Ian Brinkley, associate director of the Work Foundation, said: "Substantial increases in employment have made no progress in reducing unemployment in the three months to August 2010. The discrepancy is caused by the rise in the number of people looking for work.
"Moreover, employment growth is largely driven by part-time work and there was a significant increase in the number of people who said they took a part-time job due to a lack of full-time jobs. We have yet to see any significant recovery in full-time work."
Kevin Green, chief executive of the Recruitment & Employment Confederation, said: "The figures tally with our latest report which shows that the jobs market is starting to flatline with the growth in job placements at its slowest rate for a year.
"This deceleration raises real concerns, especially in light of expected cuts in the public sector following the Chancellor's Comprehensive Spending Review next week."
A spokesman for youth charity The Prince's Trust said: "The number of young people trapped in long-term unemployment has reached a 16-year high, with more than 230,000 facing joblessness for more than 12 months.
"This can have a devastating impact, with thousands facing a downward spiral towards depression, poverty, drug addiction or worse. Only by stopping a generation of young people from falling out of the system can we rescue this lost potential and save the economy billions each year."
Chris Ball, chief executive of The Age and Employment Network, said: "These are some very worrying signs for unemployed older people and those about to lose their jobs. We fear that worse is to come.
"Long term unemployment or economic inactivity is a very difficult position to be in when you are in or approaching your 50s. These are the workers being told that they must work longer and save more for their retirement, but at the same time they are being shut out of the labour market, making it all the harder to get back in."
Shadow work and pensions secretary Douglas Alexander said: "These are worrying figures, reflecting the current fragility of the recovery. For the second month in a row the number of people claiming Jobseeker's Allowance has risen, while the number of vacancies has fallen. Until last month, claimant count had fallen every month since January of this year.
"Labour's action during the recession had ensured that claimant count was only half what it was in previous recessions under the Tories in the 1980s and 1990s.
"Unemployment for 18 to 24-year-olds has also risen, which shows just how foolish it is to withdraw the Future Jobs Fund, and the young person's guarantee of a job, training or work experience for young people at risk of long-term unemployment."
Unemployment in the regions between June and August was:
Region Total unemployed Change on quarter Unemployment rate
North East 116,000 minus 5,000 9%
North West 277,000 minus 8,000 8%
Yorkshire/Humber 247,000 plus 1,000 9.3%
East Midlands 171,000 plus 5,000 7.5%
West Midlands 216,000 minus 14,000 8%
East 203,000 plus 4,000 6.8%
London 377,000 minus 6,000 9.1%
South East 282,000 plus 15,000 6.3%
South West 153,000 minus 14,000 5.7%
Wales 118,000 minus 12,000 8.2%
Scotland 231,000 plus 13,000 8.6%
N Ireland 58,000 unchanged 7%