Most expect unemployment to rise above two million people
The number of people out of work in the UK soared in the three months to August by 164,000 compared to the previous quarter, the biggest rise for 17 years.
The rise took the jobless total to 1.79 million and the rate to 5.7%, up from 5.2% in the previous quarter.
The Office for National Statistics figures also showed the number of people claiming Jobseeker's Allowance rose by 31,800 to 939,900 in September.
Pointing to a slowdown, both the number of people in work and vacancies fell.
After years when we could take reasonably full employment for granted, we are now in for grim times
Brendan Barber TUC
Average annual earnings growth slowed to 3.4% in the three months to August - the weakest rate in five years and an indication that rising consumer inflation is not feeding through to wage settlements.
The 5.7% unemployment rate was the highest since the three months to March 2000.
The government is to make an extra £100m available to re-train workers who lose their jobs as the economy slows.
The BBC's business correspondent Martin Shankleman said some economists were predicting that unemployment would rise to two million by Christmas.
And at least one forecast, by Capital Economics, suggested it could reach three million by Christmas 2010.
You'll be much more worried by yesterday's high inflation rate and today's big rise in unemployment than the movement of the Libor rate
Prime Minister Gordon Brown said the government would do all it could to create work and help people maintain their jobs in the British economy.
"Unemployment and redundancies are something that we wish to avoid wherever possible," he said.
But Shadow Work and Pensions Secretary Chris Grayling said the UK was now seeing the consequences of "the economic mismanagement of the last 10 years".
"Unfortunately many people suffer as a result," he added.
The Liberal Democrat Shadow Work and Pensions Secretary, Jenny Willott, said: "The effects of the banking crisis have filtered down to the real economy and are affecting people across the county."
Unemployment is likely to rise, certainly above two million. The question is how much further than that
John Philpott, Chartered Institute of Personnel and Development
"Now the banking rescue package has been agreed, the government must turn its attention to unemployment and inflation. Real families across Britain are suffering, not just those working in the Square Mile," she added.
The general secretary of the TUC union body, Brendan Barber, said the unemployment figures were "extremely bad news", especially as they did not show the effects of the bank crash.
"After years when we could take reasonably full employment for granted, we are now in for grim times. This is the next big challenge for government," he said.
Plans for additional funding would be vital, he added.
Damien Druce on the fear of losing his home and car after becoming unemployed
"There can be no assumption that the people who are losing their jobs will find it easy to get new ones, and they will need all the help they can get with redundancy pay, re-training and personal advice."
Meanwhile, the Chartered Institute of Personnel and Development said its surveys suggested the worst was still to come, with recruitment slowing and redundancies rising.
"It's simply that the crunch effect is intensifying, and will continue to intensify into next year," said the organisation's chief economist John Philpott.
"We'll see hundreds of thousands of jobs being lost, and unemployment is likely to rise, certainly above two million. The question is how much further than that."
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