Unemployment fell to 2.53 million in the three months to August, down 50,000 from the previous quarter, the latest official figures show.

Data from the Office for National Statistics revealed that the unemployment rate is now 7.9 per cent, and youth unemployment has dropped below 1 million to 957,000.

Levels of people in work have reached 29.59 million, or 71.3 per cent of the working age population, the highest number since records began in 1971.

Full-time employment is up 88,000 this quarter and there are an additional 125,000 people in part time jobs.

There are also more job opportunities available, with the number of unfilled vacancies reaching 476,000, up 3,000 on the quarter and 17,000 from a year earlier.

The minister for employment Mark Hoban said: “It’s a real landmark to see more people in work than ever before. Despite the tough economic times the private sector continues to create jobs and our welfare reforms are encouraging people to return to work - with 170,000 fewer people on the main out of work benefits than in May 2010.

"The big fall in youth unemployment is particularly welcome, but we know this remains a challenge which is why we have the GBP 1 billion Youth Contract offering nearly 500,000 work experience places, apprenticeships and wage incentives to help young people get a job."

Gerwyn Davies, labour market adviser at the CIPD, said: “A quarterly rise of more than 150,000 employees offers the strongest evidence for some time that the jobs market might be gathering genuine momentum, with growth now being driven by firms rather than the self-employed.

"Almost every economic indicator is tentatively improving; with redundancies falling, vacancies rising and increases in basic pay edging to a level close to the current rate of inflation. However, with around a third of this increase in employment being taken up with temporary work, the figures also highlight the uncertainty still felt by many employers.

“Also interesting to note is the reversal of the recent trend in the proportion of migrant and UK born workers filling vacancies. Recent quarters had seen UK-born workers fare less well in relation to non-UK born workers. However, three quarters of the employment increase is now being taken up by UK-born workers, which suggests that the government’s jobs search requirements are working.

“The only cloud on the government’s horizon is the growing tail of long-term unemployed. All eyes will now therefore be on Work Programme providers’ task of bridging the gap between the demands of employers and the employability skills of the long-term unemployed."

Kevin Green, chief executive at the Recruitment and Employment Confederation, said: “The job numbers are being driven by flexible working - the number of full time posts has grown but the increase in temps and part-time workers has been even greater. Too many people talk down the value of part-time work, but it’s here in black and white – over 80 per cent of part-time employees chose to work that way.

“Youth employment, though the lowest it’s been in over a year, is still unacceptably high and is unavoidable evidence that the government’s Youth Contract is not yet delivering.”

Neil Carberry, CBI director for employment and skills, said: “Businesses are still creating jobs in a very tough economy, with employment rising by 212,000 in the three months to August. It is particularly encouraging that youth unemployment has started to fall, which suggests that job prospects for young people are picking up.

“But despite the positive news, we still have more than two and a half million people out of work, so today's data shows that much remains to be done.”