Unemployment will increase to 2.85 million in 2012, while the number of people in work will fall by 120,000 as jobs continue to be lost in the public sector, a new report has predicted.

The Chartered Institute of Personnel and Development (CIPD) forecast that the jobless total will reach its highest since 1994, adding that it will peak at 2.9 million in the first half of 2013.

Long-term unemployment - those out of work for more than a year - and the youth jobless total, are expected to stay just under a million thanks to Government measures targeting the two groups, said the report.

The group predicted a "mild" jobs recession, with a continuation of "severe" pay restraint and pauses in productivity, features which have characterised the economy since the end of the recession in 2009.

The CIPD said if its unemployment predictions are true for 2012, it will be the first time the jobless total will have been at 2.85 million and rising since 1991. It also believed that unemployment will not fall below 2.5 million before the middle of the decade because of slow economic growth.

Dr John Philpott, chief economic adviser at the CIPD, said: "As long as there is a relatively benign outcome to the eurozone crisis, we expect the 2012 jobs recession to be milder than that suffered in 2008-9. But unemployment in the coming year will be rising from a much higher starting point, so the UK jobs market in 2012 will be weaker than at any time since the recession of the early 1990s.

"The combination of worsening job shortages for people without work, mounting job insecurity and a further fall in real earnings for those in work may test the resilience and resolve of the UK workforce far more than it did in the recession of 2008-9, and foster a tetchy passive-aggressive mood in many workplaces that could prove very hard to manage."

The latest official unemployment figures showed that 2.64 million people were out of work, with 1.6 million claiming jobseeker's allowance.

A Department for Work and Pensions spokeswoman said: "There has obviously been an unwelcome increase in unemployment since the summer but the latest unemployment figures show some signs that the labour market is stabilising.

"The number of people in employment is higher than last month's published figure and the number of unemployed people is steadying. Encouragingly this is also the case for young people not in education. The increase in those claiming jobseeker's allowance has slowed and our welfare reforms are having a positive impact, with overall benefit claimant numbers falling by around 40,000 in the last 18 months."