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Unemployment leapt closer to the 2 million level in the three months to November as 131,000 people lost their jobs, pushing the jobless total to its highest since September 1997.
The rise put joblessness up to 1.923 million, and the rate up to 6.1% - the highest since 1999.
The narrower claimant count measure, which only counts those drawing benefit, jumped by 78,000 in December alone, marking the 11th consecutive monthly rise in the claimant count and taking the total to 1.157 million. The previous month's total was revised up by 8,000 to show a rise of 83,000.
Unemployment has been rising strongly for the best part of a year and is expected by many economists to hit 3 million by 2010 as the recession takes its toll on the jobs market.
"The bad news on the labour market is absolutely relentless now as the deepening recession, slumping business confidence and persistent very tight credit conditions exact a heavy toll. Reports of companies laying off workers are becoming more and more prevalent, while an increasing number of companies are folding," said Howard Archer, economist at Global Insight.
The figures also showed that the Bank of England's fear last summer that the surge in oil prices would push up wage growth was wide of the mark. Earnings growth in the three months to November slowed to 3.1%, with November alone showing a rise of just 2.7%.
The Bank also released a survey of its business agents around the country who reported that the "broad picture remained one of shrinking demand for labour" and that "many contacts had sought to reduce head count".
Separate figures also revealed the heavy toll that recession and the bank bail-outs are taking on the public finances. The government ran a current budget deficit of £11.4bn in December, compared with just £4bn for the same month in 2007.
The Office for National Statistics calculates that "financial sector interventions" - the rescue packages for Britain's banks - had already cost the Treasury £22bn by the end of 2008. Even without the bail-outs, net government debt has bust through Gordon Brown's "sustainable" ceiling of 40%, breaking one of the cherished fiscal rules that once guided Labour's tax and spending policies.
RBS weighs on the public finances
The figures also showed a record public sector net cash requirement of £44.2bn last month, swollen by £20bn of costs related to the recapitalisation of Royal Bank of Scotland.
The government's preferred accruals-based measure - public sector net borrowing - came in at £14.9bn - just slightly down from November's record high figure.
Kathryn Hopkins
And separately the Bank of England said the monetary policy committee voted 8-1 for a half cut point to interest rates to leave them standing at a record low of 1.5% earlier this month, with arch-dove David Blanchflower calling for a full point cut.
Minutes from the MPC's meeting on 7 and 8 January, which were published today, revealed that the policymakers considered keeping rates on hold at 2% in order to give them time to assess the outlook during their February forecasting round. However, they eventually decided against this as they did not want to surprise the market or undermine confidence.
"Despite the impairment in the monetary transmission mechanism associated with dysfunctional credit markets, a cut of 50 basis points could still have a significant effect on the income of many businesses and households," the MPC argued.
They said the fall in the pound would help support growth and the rebalancing of the economy. But they also noted that if there were indications - perhaps from lower gilt prices - that a weakening exchange rate reflected a loss of credibility in UK policy, then that would be bad news for the medium-term outlook.
"However, to the extent that the falls in the exchange rate were a response to real economic developments, then they should act as a shock-absorber, increasing growth by boosting the relative demand for UK output," the MPC said.
Jonathan Loynes, UK economist at Capital Economics, said that the minutes "do nothing to undermine the view that further significant monetary policy action is ahead, both in the form of lower interest rates and quantitative easing".
"With the news on the economy still deteriorating dramatically and price pressures fading fast, it seems very unlikely that the MPC's job is done," he added.
"Overall, then, we continue to expect another 50bps cut in rates in February, with rates then falling to - or very close to zero - in Q2. After that, quantitative easing, here we come!"
- Unemployment and employment data
- Recession
- Economics
- Redundancy
- Economic policy
- Government Borrowing
- Interest rates
- Banking
- Bank of England
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