The rise in unemployment to 10.2 percent, measured according to the International Labour Organisation's (ILO) criteria, comes as the euro zone's second-largest economy has posted three consecutive quarters of zero growth.

Many economists predict unemployment, which stood at 10.0 percent in the first three months of the year, will continue to rise as companies seek to rebuild margins.

A number of French companies have recently announced plans to layoff workers, including retailer Carrefour (CARR.PA) and car maker Peugeot (PEUP.PA).

The headline figure, which includes unemployment in France's overseas territories, was France's highest unemployment rate since the third quarter of 1999.

In mainland France, the number of unemployed rose by 52,000 from the first quarter to reach 2.785 million.

Youth unemployment continued to climb in mainland France, with the rate reaching 22.7 percent for those aged from 15 to 24 years old, versus 22.4 percent in the first quarter, the INSEE national statistics office said.

With its approval ratings sliding, President Francois Hollande's Socialist government has fast-tracked plans to launch a scheme to create 150,000 state-subsidized jobs for young people, at a cost of around 2 billion euros this year and next.

According to monthly figures published by the Labour Ministry, unemployment continued to rise in the third quarter, with August registering a 15th consecutive monthly increase in the number of people seeking work.

Labour Minister Michel Sapin said on Sunday that the number of unemployed people had crossed the psychologically important threshold of 3 million in August.

(Reporting By Daniel Flynn; Editing by Leigh Thomas and Susan Fenton)

• A Permanent Economic Emergency