Employer bodies have called on the coalition government to focus on delivering a "meaningful budget for jobs" next week in order to tackle steadily rising unemployment, which is now at a 17 year high.
UK unemployment increased by 27,000 in the three months to the end of January, hitting 2.53 million or 8%, the highest level since 1994, according to official figures from the Office of National Statistics. The number claiming Jobseeker's Allowance fell by 10,200 in February to 1.45 million, however.
Another record high was hit in terms of unemployment rates for 16-24 year olds, which includes students looking for work. This figure was up 0.8% to 20.6%.
The statistics suggest that the labour market weakened at the end of last year, well before the impact of the government's spending cuts and tax hikes began to take effect. In fact, public sector employment dropped by 45,000 to 6.2 million during the quarter and by 123,000 over the year to December 2010.
As a result, John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development warned that the total tally of public sector job cuts was likely to be "considerably higher" than current Office for Budget Responsibility estimates implied.
The labour market did not appear to be in "meltdown", however, he said, as the private sector was employing more workers and the number of people on benefits had dropped, which meant that it "might withstand the economic headwinds better than previously expected", although the outlook remained uncertain.
But Kevin Green, the Recruitment & Employment Federation's chief executive, warned that, although there were "positive signs" of improving employer confidence and increased hiring activity in many sectors, the ONS figures confirmed that "the private sector is some way off being able to absorb public sector job cuts".
As a result, unemployment would continue to rise until the autumn, before starting a slow decline at the end of this year and into next. This meant that "the onus is now on the Chancellor to announce measures in the Budget next Wednesday, which will stimulate the economy and generate job creation", he said. In fact, "a meaningful Budget for jobs" was now a matter of urgency, Green added.
One critical measure, said Liz Field, chief executive of the Financial Skills Partnership, was to support employers in investing in skills, vocation-based training such as apprenticeships and work experience opportunities, particularly for young people.
The British Chambers of Commerce, meanwhile, called for next week's Budget to reduce the regulatory burden facing businesses in order to stimulate job creation. It predicted that unemployment would rise to 2.65 million over the next 12 to 15 months, before falling back again.
