Unemployment levels increased by 210,000 to a total of 2.47 million in August taking the total UK jobless rate to 7.9%.
The Office for National Statistics said claims for unemployment benefit in August grew by 24,400 from July to 1.61m, the highest since May 1997.
Average earnings, including bonuses, increased by 1.7% in the three months to July, down from the previous month.
The number of 16 to 24-year-olds out of work rose from 928,000 to 947,000 - edging closer to the landmark of one million and adding to fears of a new "lost generation" of young people.
The jobless rate among this age group is at 19.7% - the highest since records began - meaning almost one in five is looking for work.
The level of unemployment is now at its highest since May 1995 and employment minister Jim Knight said the Government was doing all it could to get people back into work.