Media playback is unsupported on your device Media caption Employment Minister Chris Grayling: "It is a mixed picture"

UK unemployment rose by 27,000 in the three months to the end of January to 2.53 million, the highest since 1994.

The Office for National Statistics (ONS) said the jobless rate was now 8%, the highest since 1996.

However, the ONS figures also showed that the number of people claiming jobseeker's allowance fell by 10,200 in February to 1.45 million.

Another record high was reached in the unemployment rate for 16-24 year olds, up by 0.8% to 20.6%.

This figure, however, does include students who are looking for work.

The unemployment rate for 18-24 year olds was also at an all-time high at 18.3%.

The ONS report also shows that average earnings in January were 2.3% higher than a year ago, mainly driven by bonus payments in the finance and business services sector.

Wage growth, although higher than expected, is well below the level of growth the Bank of England finds concerning and is unlikely to put pressure on the Bank to raise interest rates.

Average pay including bonuses was £453 a week.

Public sector cuts

The jobs data showed that number of people in work increased by 32,000 to 29.16 million, the highest figure since last autumn.

A record number of 50-64-year-olds were in work - their numbers rose by 25,000 to 7.3 million.

Media playback is unsupported on your device Media caption Labour's shadow work and pensions secretary Liam Byrne: "These figures are a matter of deep concern"

Public sector employment fell by 45,000 in the final quarter of 2010 to 6.2 million, even before the full impact of the government's spending cuts started to take effect.

Local government employment fell by 24,000, central government by 9,000 and Civil Service by 8,000, while employment in private firms increased by 77,000 to almost 23 million.

There were almost half a million job vacancies in the three months to February, up by 24,000 over the previous quarter.

'Unwelcome'

The Prime Minister, David Cameron, said the youth unemployment numbers were "disappointing, once again".

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But he said it was a "very mixed picture", pointing to higher number of people in employment and fewer people claiming unemployment benefit.

The Employment Minister, Chris Grayling, said: "Clearly any increase in unemployment is unwelcome and a disappointment and it underlines the need for a Budget next week which focuses on growth, on creating an environment where businesses are growing and developing and creating jobs."

He said the data underlined the need to press ahead with policies to stimulate growth in the private sector.

However, the shadow work and pensions secretary, Liam Byrne, said that the private sector was not creating jobs fast enough to offset the public sector job cuts that were "on the way".

"It doesn't look like the private sector is creating enough jobs to absorb what we know is coming down the tracks, and that's why the government has got to change course on the economy," he told the BBC.

'Shocking'

The TUC general secretary, Brendan Barber, called the figures "shocking".

He said: "Over a year after the recession technically ended, unemployment is now at its highest level since the mid-1990s, with 2.53 million people out of work.

"While the fall in the numbers claiming the dole is welcome, the number of jobs available in the economy has also fallen and there are over a million people in part-time work seeking permanent jobs."

David Kern, chief economist at the British Chambers of Commerce, described the figures as "mixed, but not as bad as some had feared".

"We reiterate our forecast that total unemployment is likely to increase to 2.65 million over the next 12-15 months before it starts declining," he said.

Graeme Leach, chief economist at the Institute of Directors, said: "The good news is that there doesn't seem to be any evidence of a wage price spiral developing, with the underlying growth in average earnings (excluding bonuses) actually falling from 2.3% to 2.2%. This clearly helps reduce the upward pressure on interest rates. "

The level of unemployment rose in Wales by 2,000, by 4,000 in Northern Ireland and by 38,000 in England. However, unemployment dropped by 16,000 in Scotland.