Total unemployment has soared to above 1.8m for the first time since the end of 1997, the year Labour came to power, according to official figures published on Wednesday.

The number of people out of work rose by 140,000 to 1.82m during the three months to the end of September according to the Office for National Statistics.

The number of people claiming unemployment benefit also rose last month by 36,500, to almost 981,000. This was the biggest monthly rise for almost 16 years. The last time there were as many people on jobseekers' allowance was in 2001, said officials.

It was also the ninth month in a row that the claimant count had risen. An overall unemployment rate of 5.8 per cent - using the International Labour Organisation measure, preferred by economists - is the highest since 2000.

The depressing statistics were published just a day after a total of 5,000 redundancies were announced by some of Britain's biggest companies including Taylor Wimpey, Virgin Media, Yell, Glaxo and Psion. Vodafone also announced it was embarking on a £1bn cost cutting exercise which is expected to lead to further job losses.

"There can be little doubt that the deterioration in the labour market will deepen markedly further over the coming months, given that the economy seems set to contract by around 1.5% in 2009," Howard Archer, economist at Global Insight, said. "It is clear that unemployment on the claimant count measure will move above 1 million in November, and we suspect it will reach 2 million in the first half of 2010.".

The rising tide of unemployment will add to the pressure on government as it seeks to revitalise the economy through a programme of interest rate cuts, public spending and tax reductions.

"The dole queue is now growing by a 1,000 people a day - each one a human tragedy of wasted potential," TUC General Secretary Brendan Barber said. "And the signs are that redundancies are coming even faster since these figures were collected. Countering unemployment must be public policy priority number one."

Tony McNulty, employment minister said that the government was doubling the funding for Jobcentre Plus' Rapid Response Service, from £3m to £6m, as part of its efforts "to get those people who have become unemployed back to work as quickly as possible". People who are worried about the current downturn need to know that there are jobs out there - the claimant count may be rising, but large numbers of people are also moving off benefits and into jobs," he said.

Some City economists have forecast that total unemployment could hit 2.7m by 2010, the latest date by which Labour must call a general election.

According to the ONS the number of people in work also fell by 99,000 to 29.41m during the three months to the end of September. More men - 85,000 - joined the ranks of unemployed than women - 55,000 - over the quarter.

Public sector employment has also held up better than in the private sector where business leaders have reported a sharp fall in business confidence during the summer.

Job vacancies, which had remained relatively strong earlier this year, have also started to slide, falling by 40,000 to 589,000 during the three months to the end of October.

The biggest fall was in the construction sector, which has been hit hard by the decline in house sales. Job vacancies in construction were 26 per cent lower than in the previous three monthly period and 37 per cent below levels prevailing a year ago, said ONS.

Transport and communication vacancies over the same period fell by 13 per cent and 27 per cent. In manufacturing they have fallen by 13 per cent and 23 per cent as the effects of the credit crunch have spread to other sectors.

The one piece of consoling news for the government was that pay rises have continued to remain modest. Average earnings including bonuses rose at annual rate of by 3.3 per cent during the three months to the end of September, 0.1 percentage points lower than in the previous three monthly period.

Economists noted that wages data showed no sign of inflation, with average private sector pay rises unchanged at 3.6 per cent. However, the impact of a weakening economy took a toll on bonuses, with average private sector pay including bonuses rising by 3.1 per cent. The average rise excluding bonuses was unchanged at 3.6 per cent.

Richard McGuire, fixed interest strategist at RBC Capital Markets, said: "With the balance of concerns having shifted decisively from high inflation becoming entrenched in the form of second round effects to the rapidity with which price pressures are set to fall away in the coming monhs, the labour data released here enjoy an uncustomary top billing. These data came in broadly in line with expectations but nevertheless pointed to a rapidly weakening jobs market."

He noted that the weakness in the data showing up already in September suggests that interest rates have further to fall from current levels and that these are likely to remain low for some time.