Unemployment surged past two million for the first time in 12 years today, while the number of people signing on for benefit soared by a record 138,000 last month, grim new figures showed today.
The Government was hit by a raft of gloomy news, with redundancies reaching a record high, jobs and vacancies falling and more people claiming jobseeker's allowance.
The total number of people out of work, including those not eligible for benefit, jumped by 165,000 in the quarter to January to 2.03 million, the worst figure since Labour came to power in the summer of 1997.
The quarterly rise was the highest since 1991, and the total has now increased by 421,000 over the past year, said the Office for National Statistics.
Jobseeker's allowance claimants increased by 138,400 in February, the 13th consecutive monthly rise and the largest monthly increase since records began in 1971.
The new total of 1.39 million is almost 600,000 higher than a year ago and is the highest figure since 1998.
A total of 266,000 people became redundant in the three months to January, the worst figure since records began in 1995 and up by 86,000 on the previous quarter.
The number of jobs fell by 203,000 to 31.3 million in the quarter to December, the largest slump since 1992.
Vacancies fell by 74,000 to 482,000 in the three months to February, the lowest total since comparable records began in 2001.
Other figures showed that average earnings increased by 1.8 per cent in the year to January, the lowest since records began in 1991, while for the month of January alone wages fell by 0.2 per cent - the first time this has ever happened.
The unemployment rate is now 6.5 per cent, an increase of 1.3 per cent over the year, the highest figure since the end of 1997.
The number of people employed in the public sector was 5.78 million in December, up by 15,000 over the quarter and by 30,000 over the year, while employment in private firms fell by 13,000 to 23.6 million over the quarter and by 105,000 over the year.
The only piece of good news for ministers in today's figures was a 102,000 fall in the number of people classed as economically inactive, to 7.8 million, the lowest for almost three years.
The figure includes people looking after a relative, those on long-term sick leave, students and people who have given up looking for work.
Manufacturing productivity fell by 5.6 per cent in the quarter to January, the biggest cut since 1985.
Unemployment among 16 to 24-year-olds increased by 23,000 to 621,000 in the quarter to January, while the number of people out of work for at least a year was 460,000, up by 23,000 from the three months to October.
Today's data also showed a 48,000 fall in the number of people in full-time employment in the latest quarter, to 21.8 million, and a 50,000 increase in part-time workers, to 7.55 million.
The TUC general secretary Brendan Barber said: "This is another milestone in the return of mass unemployment to the UK, and it will get worse before it gets better as unemployment always persists even after a recovery starts.
"But this unemployment has not just been made in Britain, and requires an international response. It is beginning to look like the G20 summit may not agree the co-ordinated boost to the world economy called for by Barack Obama and Gordon Brown.
"International summits may seem a long way from the dole queues, but without such a stimulus unemployment will go higher and last longer.
"We need to put every pressure on world leaders to work together to fight the recession."
Paul Kenny, general secretary of the GMB, said: "As well as the misery for the two million on the dole, add the fear of millions of others who know that they too are at risk of redundancy. We do not know who the next million to lose their job will be.
"The harsh reality is that capitalism is revealed as anarchy writ large. Voters are not known to vote for anarchy. This could impact on voters at the next election."
Peter Mooney, of Employment Law Advisory Services, said he believed the figures may be an under-estimate of the true level of unemployment.
"This is a huge psychological blow to British business. While the figures seem shocking, we are not in the least surprised. The number of firms seeking help in making redundancies has sky-rocketed, and that is continuing, shooting up week on week.
"These figures are at best a fuzzy picture of what was true up to January - but things have worsened considerably since then.
"We are seeing jobs slashed drastically - especially in the North East, West Midlands, North West and parts of London."
Alan Tomlinson, partner at licensed insolvency practitioner Tomlinsons, said he had never been so busy, adding: "Companies of all sizes, and in all sectors, are folding by the day, putting more and more people out of a job.
"The CBI's prediction, last month, that unemployment will peak at just over three million in the second quarter of 2010 could prove to be wildly optimistic."
David Kern, chief economist at the British Chambers of Commerce, said: "The outlook for unemployment is worsening and there is an urgent need for action. At this rate, unemployment looks set to reach 3.2 million in 2010.
"Even with some staff accepting pay freezes and working fewer hours, it is clear that employers are facing significant financial pressures.
"There is a vital need for steps specifically aimed at preventing a damaging loss in our industrial skills base. Temporary measures such as wage subsidies need to be seriously considered."
Baroness Valentine, chief executive of business group London First, said: "We need swift action to support investment and employment - it costs much less to keep people in work than to create new jobs.
"Government must lead from the front in setting up apprenticeship schemes in Whitehall.
"We need new investment in productive infrastructure - such as electrification of the outer London rail line - and get moving on existing programmes, such as improvements to further education colleges."
Unemployment in the regions between November and January was:
Region Total; unemployed; Change on quarter; Unemployment rate
North East; 109,000; plus 5,000; 8.6%
North West; 262,000; plus 19,000; 7.7%
Yorkshire/Humber; 186,000; plus 1,000; 7.1%
East Midlands; 147,000; plus 20,000; 6.4%
West Midlands; 210,000; plus 29,000; 7.9%
East; 165,000; plus 29,000; 5.5%
London; 307,000; minus 1,000; 7.5%
South East; 212,000; plus 12,000; 4.8%
South West; 139,000; plus 24,000; 5.1%
Wales; 109,000; plus 15,000; 7.6%
Scotland; 135,000; plus 1,000; 5.1%
N Ireland; 46,000; plus 10,000; 5.7%
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