Unemployment has reached a six-year high, with 5.5 per cent of the population now classed as officially out of work.
The latest labour market statistics from the government show 1.7 million were unemployed in August, up 45,000 on the previous three months and 276,000 on the year.
The number of people claiming jobseeker's allowance in September has also gone up to 962,000. This is 10,200 more than last month and 82,700 more than last year.
However, employment has also reached the highest level ever, with 29.02 million now in work, up 120,000 on the previous quarter and 255,000 more than a year ago.
Economic inactivity - the number of people who are eligible to work but do not - is also down by 64,000 on the last quarter and 154,000 over the last year, to 20.9 per cent.
"The UK continues to have the best performing labour market of the major world economies," said employment and welfare minister Jim Murphy.
"The strong growth in older workers is particularly welcome. It's fitting that in the month that we took steps to outlaw age discrimination for good, today's figures show employment is up by over 200,000 in the last year for people aged over 50."
A row broke out earlier this week when Conservative leader David Cameron suggested the government's unemployment figures were inflated to hide the fact that five million people were actually out of work - far more than today's figure of 1.7 million.
Ministers were quick to refute the claim, saying Mr Cameron's figure included all single parents claiming income support, even those with days-old babies; everyone on incapacity benefit; and many carers who were not looking for work.
But today the Tories have gone further and accused Tony Blair of misleading the public by claiming that long-term youth unemployment had been "eradicated".
Figures from the Office for National Statistics (ONS) show this kind of joblessness has increased by nearly 30 per cent in the last year, and 54 per cent since 2004.
"The inaccuracy of Tony Blair's claim will be all too obvious to the 175,000 young people who are languishing in long term unemployment right now," said shadow work and pensions secretary Philip Hammond.
He added: "With unemployment at its worst level for six years it is clear that Labour's economic policies are failing to deliver long-term prosperity for this country."
Liberal Democrat Treasury spokesman Vince Cable noted that today's figures continued the almost year-long trend of rising unemployment, and warned that with interest rates likely to rise further, this problem was set to get worse.
"Since the government came into office, there has been a tripling of 16 and 17-year-olds who are not in work or full-time education. The positive story about unemployment, which this government successfully developed, is now seriously unravelling," he said.