David Cameron tells MPs the government will do 'everything it possibly can' to help get people into work Press Association

The number of people out of work in Britain has hit its highest level in 17 years and youth unemployment has reached a record high as the economic slowdown continues to take its toll.

The Office for National Statistics said on Wednesday that 2.57 million people were out of work over the June to August period, the highest since the autumn of 1994. There were almost 1 million unemployed young people.

Economists predicted more bad news on the labour market to come for the government.

"This shouldn't really come as a surprise – the economy is growing at half the pace it needs to in order to keep unemployment stable. That isn't going to change any time soon – in fact it is probably going to get worse. Given this, we should get used to jobs reports like this one," said Alan Clarke at Scotia Capital.

As the total number of unemployed people rose by 114,000 during the quarter, the unemployment rate reached 8.1%, the highest since the autumn of 1996.

Unemployment among 16- to 24-year-olds, the age group worst affected by the slowdown in the labour market, rose to 991,000 in the three months to August. That was the highest total on record. The youth unemployment rate, at 21.3%, was more than double the rate for the UK as a whole and also the highest since comparable records began in 1992.

Job market think tank The Work Foundation said the data showed the UK was moving back into recession.

"The labour market figures released this morning are very troubling. The fall in employment of 180,000 in a single quarter is comparable to the quarterly losses seen during the depths of the last recession," said the foundation's centre director Ian Brinkley.

But he noted one mitigating factor: the fact that most of the job losses were for part-time posts. The number of people working part-time fell by a record 175,000 over the quarter to reach 7.78 million, the ONS said. The part-time fall was out of a total fall in employment of 178,000.

"People still in work seem to be increasing their hours at the same time as the workforce contracts," Brinkley added.

The Centre for Economics and Business Research (CEBR) said the latest rise in unemployment was unlikely to put the government off its austerity drive, however.

"Despite the weak labour market, the government is unlikely to significantly change course on fiscal austerity plans. David Cameron, George Osborne and Nick Clegg all reaffirmed their commitment to 'Plan A' during party conference season and a U-turn on fiscal austerity would now prove politically embarrassing," said CEBR senior economist Scott Corfe.

"Although the economic picture has changed and historically low bond yields may justify some fiscal loosening, political pride has bound the hands of policymakers."

Reflecting government cuts, the number of people in public sector employment fell 111,000 over the three months to June. The private sector did not fulfil the government's hopes for it to pick up the slack, as only 41,000 more people joined the private sector payroll over the same period.