Almost a million young people are out of work after the biggest increase in unemployment since Labour came to power.

Youth unemployment has soared to a 16-year high, with 17.3 per cent of those aged 18 to 24 out of work — up from 15 per cent in February. The Prince’s Trust said that a young person was losing a job almost every minute over the past three months.

Almost a third of those aged between 16 and 17 who left school after GCSEs are also out of work, amid fears that unemployment among the young is set to rise over the summer as a new generation of school leavers and graduates struggles to find work.

Unemployment increased by a record 281,000 between March and May, bringing the total to 2.38 million — the highest since October 1995.

Yesterday’s figures also revealed that the number of long-term unemployed — those out of work for more than a year — has risen by 46,000 to an 11-year high of 528,000, with almost half that total having been jobless for two years.

There was a record fall in the number of people in full-time employment — down by 257,000 in the three months to May. More than 300,000 people were made redundant over the same period, in the second-highest number of job losses on record, pushing the official unemployment rate up to 7.6 per cent — the highest since January 1997, before Labour took office.

Jaguar, the carmaker, deepened the gloom as it announced plans to scrap production of its X-Type car by the end of the year, with the loss of up to 300 jobs at its plant at Halewood, on Merseyside. The Halewood factory is also to close for three weeks as the business reacts to slack demand.

Those still in work are affected by cuts in working hours, pay freezes and wage cuts. The number of total hours worked across the country has fallen by 3.1 per cent since the start of the recession, with economists warning of worse to come. Michael Saunders, UK economist at Citigroup, the US bank, noted that in the past two recessions the figure for weekly hours worked fell by 5 per cent.

Numbers of staff on “short-time working” have trebled over the past year, while numbers working fewer hours or taking leave on reduced pay soared to 123,000 in the first quarter, from 36,000 a year earlier.

Many more people are also being forced to take part-time jobs, because they cannot find a full-time position, with 927,000 people now saying that they face this predicament, up by 255,000 from a year ago.

The overall number of available job vacancies has hit a record low, at only 421,000 last month, down by a third from a year before.

There was one glimmer of hope in yesterday’s figures, however, as the claimant count of unemployment, gauging numbers out of work and claiming jobseeker’s allowance, rose by a much smaller than expected 23,800 in June — down from 30,800 in May, and a massive 136,600 in February. Most City experts still predict that unemployment will hit three million late this year or early next before there is any improvement.

The divergence between the headline unemployment numbers, based on ministers’ preferred measure, the official Labour Force Survey, and the claimant count numbers totalling those on unemployment benefits, left economists puzzled. Some argued that the benefits-based figures are giving a falsely optimistic picture of the jobs market, masking sharper rises in unemployment as they exclude those on to training schemes.

Brendan Barber, TUC General Secretary, said that the figures were “truly horrendous”. Jim Knight, the Employment Minister, maintained that the jobless level was lower by about half a million than it would have been without government action.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive