Unemployment is rising sharply as the private sector fails to fill the jobs gap being left by cutbacks in the public sector, grim figures reveal.

Data from the Office for National Statistics (ONS) revealed unemployment across the UK has reached a 17-year high after more than 100,000 people joined the ranks of those looking for a job.

The picture was particularly bleak among the 16-24 age group where the jobless figure increased by  74,000 over the latest quarter to 991,000, a rate of 21.3% – the highest total since comparable records began in 1992.

Deep cuts in state spending will erase more than 300,000 public sector jobs in coming years, while the economy is teetering on the brink of recession again as consumers tighten their belts and key export markets slow down, particularly in Europe.

The government was quick to blame the rise in unemployment to 2.57m on the global financial crisis and the eurozone turmoil.

But calls for it to ease its austerity plans increased as fears of a “lost generation” of young people without hope of a job are growing.

Terry Dray, director of graduate advancement and employer engagement at Liverpool John Moores University, told LDP Business that public sector cuts were hitting graduate recruitment.

He said: “In essence it is about the fall number of opportunities, particularly in the public sector. I think another factor is that many students looks for jobs in the same area as they went to university.

“Around 74% LJMU’s leaving class in 2010 took jobs in the city region or in the North West. While we want to retain talent in the region it would probably help some students if they were to broaden their horizons.”

Mr Dray added that the employability rate among LJMU graduates was actually improving.

he number of people claiming jobseeker’s allowance (JSA) in the Liverpool city region has risen by more than 800 in the last month to 55,759. This represents a rise of 1.52%, worse than the North West rise of 1.4% and well above the national rise of 0.1%.

Knowsley saw the biggest rise in JSA claimants at 4.1% followed by St Helens, 3.1%, Halton, 1.9%, Wirral, 1.7%, Liverpool 0.7% and Sefton, 0.3%. Year-on-year the claimant count across the Liverpool city region is up 10.3%.

Graeme Leach, chief economist at the Institute of Directors, said: "These are grim figures, and are likely to get worse before they get better. But abandoning the deficit reduction plan will do the unemployed no favours.”