The number of 16 to 24-year-olds looking for work increased by 67,000 in the quarter to September to 1.02 million, the worst total since comparable records began in 1992, giving a jobless rate of 21.9%, also a record.
Unions, business groups and opposition parties all called for measures to halt the decline in employment amid predictions of worse to come, especially among women and the young.
British Gas, mining giant Rio Tinto Alcan and Clydesdale and Yorkshire banks added to the gloom with separate announcements of almost 1,700 job cuts.
Meanwhile, the Bank of England painted a bleak economic picture for the UK as it forecast a heightened risk of a double-dip recession and paved the way for another round of emergency measures.
Bank governor Sir Mervyn King sent a stark message to political leaders as he flagged an unresolved eurozone debt crisis as the "single biggest risk" to the economy.
Employment Minister Chris Grayling said the unemployment figures showed how much the economy was being affected by the crisis in the eurozone, adding: "Our European partners must take urgent action to stabilise the position.
"Our challenge in the autumn statement will be to put in place additional measures to support growth and create employment opportunities, especially for young people."
Business secretary Vince Cable said youth unemployment was a "long-standing and deep-rooted" problem as he helped launch a number of Government measures aimed at assisting young people in finding work.
But Labour leader Ed Miliband said it was a "terrible day" for the country, adding: "Instead of blaming everyone else and trying to find excuses in the eurozone, the Government should recognise that the British economy has been flatlining for a year - long before this recent crisis began. David Cameron needs to start listening, take some responsibility and change course."
The new figures showed that total unemployment rose by 129,000 in the latest quarter, to 2.62 million, the worst since 1994, giving a jobless rate of 8.3%, the highest since 1996.
Other data from the Office for National Statistics showed a 5,300 increase in the number of people claiming jobseeker's allowance in October to 1.6 million, the eighth consecutive monthly rise and the highest total since the start of 2010.
Meanwhile, the number of people in employment fell by 197,000 in the quarter to September to 29.07 million, the lowest figure for over a year.
TUC general secretary Brendan Barber said: "Today's milestone of more than a million young people being out of work is the true mark of the Government's economic strategy.
"Government plans to offer cut-price work experience are a woefully inadequate response."
John Walker, chairman of the Federation of Small Businesses, said: "Youth unemployment figures are truly shocking and with more than one million young people unable to find a job, the Government must wake up and take action to turn this around - and its autumn statement is the perfect time to do this."
John Salt, director of recruitment firm totaljobs.com, said: "Today's figures are devastating.
"The rise in unemployment shows how incapable the private sector has been at clearing the unemployment caused by public-sector cuts, which is unsurprising given the state of the market."
At a jobcentre in Leeds, Liam Blakeley, 19, said he has been trying to find work for two years without much luck, continuing: "The economy is just crap, that's my take on it. I want painting and decorating work or construction work, but people don't want to know."
Mr Cable announced new measures which he said would ensure more young people benefited from an apprenticeship, and to help employers gain the skilled workers they need to grow.
He told businesses in London that the Government would slash the red tape which can deter firms from taking on apprentices, and provide a financial incentive to help the smallest firms recruit their first young apprentices.
Tony Wilson, of the Centre for Economic and Social Inclusion, said: "Two years after the worst of the 1990s downturn, long-term unemployment for young people was falling. Two years on from this recession, it is rising more quickly than at any point for at least 20 years."
Anna Bird, acting chief executive of the Fawcett Society, commenting on figures showing that 1.09 million women were now unemployed, said: "The government's approach to reducing the deficit is pushing women out of the workplace, and threatening their financial independence."
Rio Tinto Alcan, a subsidiary of FTSE 100-listed Rio Tinto, said it wants to close the Lynemouth smelter in Northumberland due to spiralling energy costs. The group hopes the power station will remain open under new ownership.
British Gas is planning to cut around 850 jobs after reviewing resource levels in its services business and Clydesdale and Yorkshire Banks announced plans to reshape their business banking operations which are likely to result in a net reduction of 190 jobs.
PA
Comments