Unemployment increased by 23,000 between February and April to 2.47 million, giving a jobless rate of 7.9%.
Long-term and youth unemployment both increased but the most striking figure was a 29,000 rise in people classed as economically inactive to 8.19 million, 21.5% of the working age population.
The figure includes students, people looking after a relative, workers on long-term sick leave, or those who have given up looking for jobs.
The number of people in the long-term sick category rose by 58,000 to 2.07 million in the latest quarter.
The number of people claiming jobseekers allowance fell by 30,900 in May to just under 1.5 million, the fourth consecutive monthly fall.
The number of people out of work for more than a year increased by 85,000 to 772,000 in the three months to April, while unemployment among 16 to 24-year-olds rose by 11,000 to 926,000.
Other data from the Office for National Statistics (ONS) showed the number of full-time workers fell by 56,000 while part-timers rose by 61,000.
The number of people working part-time because they could not find a full-time job increased by 45,000 to a record high of 1.08 million, today's figures revealed.
There was a slight increase of 5,000 in the number of people in employment in the latest quarter, to 28.8 million, but the figure was 213,000 lower than a year ago.
Public sector employment fell by 7,000 in March to 6.09 million, while employees in private firms increased by 12,000 to 22.78 million.
Average pay increased by 4.2% in the year to April, down by 0.1% from the previous month.
The ONS said average regular pay, excluding bonuses, was £428 a week in April, an increase of 1.9% on a year earlier.
Around 173,000 people were made redundant in the three months to April, up by 6,000 from the quarter to January.
Unemployment in the regions between February and April was:
Region Total unemployed Change on quarter Unemployment rate
North East 119,000 minus 1,000 9.3%
North West 294,000 plus 4,000 8.6%
Yorkshire/Humber 255,000 plus 24,000 9.6%
East Midlands 164,000 minus 9,000 7.2%
West Midlands 240,000 minus 14,000 9.0%
East 196,000 no change 6.6%
London 366,000 plus 7,000 9.0%
South East 286,000 plus 12,000 6.4%
South West 161,000 minus 3,000 6.1%
Wales 123,000 minus 10,000 8.5%
Scotland 212,000 plus 7,000 8.0%
N Ireland 58,000 plus 6,000 6.9%
The Government said the latest figures showed the scale of the welfare challenge it had to tackle.
Employment Minister Chris Grayling said: "These figures underline why it was so important to stop the jobs tax planned by the previous government, and why we need to create real incentives for businesses to grow and create job opportunities.
"The figures also demonstrate why our planned work programme is so important.
"With nearly five million people on out-of-work benefits and record numbers of people who are economically inactive, we have to make sure that as the economy grows and jobs are created in the next few years that we learn from the mistakes of the past, and ensure that we provide real help and support for people on benefits so they can take advantage of employment opportunities and make the move into work."
The work programme will offer personalised support to people on a range of benefits and will be launched early next year.
John Walker, chairman of the Federation of Small Businesses, said: "Small businesses have been fighting to retain their staff through the downturn, hoping that the economic situation would improve in 2010 so that they can get back to running their business, so this increase in unemployment is worrying.
"We know that small firms want to take on new staff but are put off by taxes."
TUC general secretary Brendan Barber said: "Today's figures should serve as a stark reminder to the Government that the jobs market is still bleak.
"Unemployed people are facing a postcode lottery in their search for work with dole claimants outnumbering job vacancies by over 10 to one in some employment blackspots.
"The worst possible response would be to slash spending which will cut demand in the economy and send hundreds of thousands of public and private sector workers on to the dole.
"Deep cuts now could permanently damage the prospects for the one million young people out of work who are struggling to get their careers off the ground."
Shadow work and pensions secretary Yvette Cooper said: "These figures show why it would be mad to cut support for jobs and the economy right now.
"Unemployment is slightly lower this month and it's still half the level of the 80s and 90s recessions because of the action the Labour government took.
"But unemployment is still too high. That's why it would be crazy to axe 90,000 Future Jobs Fund jobs and cut support for the economy now as the Tory-Liberal Government plans.
"Independent experts have warned that their actions risk pushing unemployment up to three million. We believe that unemployment is never a price worth paying."
Unite's joint general secretary Tony Woodley said: "Cameron and Clegg cannot claim any economic competence when they are complacently presiding over increasing unemployment.
"The ConDem Government is determined to slash public services and put even more people on the dole. Unemployment is never a price worth paying, it destroys lives and leaves permanent scars on our communities.
"The ConDem Government has working families staring over a precipice and from next Tuesday (emergency Budget day) they are going to start trying to push us off unless we are prepared to fight back."
Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, said: "The rise in headline unemployment is again dampened by a rise in the number of economically inactive people, though in a break with recent trends this is due to more people giving up looking for work saying they are long-term sick rather than an increase in student numbers.
"Signs of recovery in the private sector jobs market are welcome but beg the question whether the private sector will be able to fill the jobs gap once the process of public sector downsizing gets fully under way.
"Spending cuts announced by the coalition Government for the current financial year will reduce public sector employment by around 50,000 by next Spring, on top of any reductions already in the pipeline.
"Next week's emergency Budget will contain measures that will lead to a subsequent mass cull of public sector jobs. In the absence of a strong private sector jobs recovery, the cull will lift headline unemployment toward three million by 2012.
"Moreover, while the private sector jobs market is improving all the net new jobs being created at present are either part-time, temporary positions or filled by the self-employed."
Dave Prentis, general secretary of Unison, said: "With unemployment on the up again it makes no sense to throw thousands more people on to the dole queues.
"Cuts to public spending will have a huge impact on the local economy and will devastate communities and families.
"We face a lost generation of disaffected young people, struggling to get their first foot into work. Cutting hard and fast will risk a double dip recession. We need to protect public services and create opportunities for young people and the long-term unemployed."
Ian Brinkley of the Work Foundation said it was still premature to talk about a solid recovery in private sector employment, adding: "The big challenge for the new Government is to avoid large and rapid reductions in public sector employment before private sector jobs start to come through."
The research group estimated that by 2015 the private sector could absorb around half a million jobs lost from the public sector, but it warned that cuts of a million jobs would "overwhelm" any plausible growth in private sector jobs.
"If cuts are too big and implemented too soon, the private sector will be swamped, with severe problems amongst those ex-public sector workers whose current skills and experience make it hard for them to take new private sector jobs.
"New job seekers with the least skills and experience will find it even tougher to find work, threatening persistently high levels of unemployment among the under 25s," said the foundation.
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