The Prime Minister has admitted that the Government had to do more to get the economy moving after "horrific" figures showed unemployment at a 17-year high, the number of young people out of work nearing a million and Jobseeker's Allowance claimants increasing for the seventh month in a row.
Both sides of industry voiced concern about the state of the jobs market, while Labour leader Ed Miliband told David Cameron it was time to admit the Government's plan "isn't working".
The Prime Minister told the Commons: "I accept we have got to do more to get our economy moving, to get jobs for our people, but we mustn't abandon the plan that has given us record low interest rates."
Unemployment increased by 114,000 to 2.57 million in the quarter to August, the worst total since the autumn of 1994, giving a jobless rate of 8.1%, the highest since 1996.
Youth unemployment reached a record high of 991,000, while the numbers claiming Jobseeker's Allowance increased for the seventh month in a row, to 1.6 million, date from the Office of National Statistics has shown.
Other figures showed a 178,000 slump in employment in the quarter to August - the biggest fall in more than two years - and the largest-ever cut in the number of part-time workers, down by 175,000.
The number of people classed as economically inactive increased by 26,000 to 9.35 million, a rate of 23.3%. Taking the inactivity rate and the new jobless figures together, half of 16 to 24-year-olds are now not employed, it was revealed.
At Prime Minister's Questions in the Commons, Mr Miliband said it was time for Mr Cameron to admit the Government's plan "isn't working", adding: "The same script, month after month. Doesn't he realise? It isn't working."
TUC general secretary Brendan Barber said: "These are terrible figures. The Government's austerity measures have turned unemployment into a full-blown crisis - with job losses not seen since the darkest days of the recession."
John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), said: "The quarterly rise in unemployment is reminiscent of an economy in recession rather than any kind of recovery and confirms that the private sector just isn't creating enough jobs at present to offset public sector job cuts."