Approximately half the Palestinian population still live in poverty, and the situation is getting worse, according to a report released by the International Labour Organisation (ILO).
ILO representatives "observed a prevailing feeling that the economic situation of Palestinians must improve in order for them to continue to support the policy of dialogue and negotiation with Israel," the report said.
The unemployment figure was up from the previous recalculated record of 203,000 a year earlier. The agency defines unemployed as people without a job actively looking for work.
Previous unemployment data also included estimates on how many people were pressured into no longer looking for work.
Israeli checkpoints hinder
Palestinians from working
In 2004, less than half of all men and fewer than 10% of women in the West Bank and Gaza Strip were actively employed, the report said.
Unemployment has increased primarily due to the closures, checkpoints, roadblocks, permits and other aspects of Israeli occupation that hinder Palestinians from working, the 43-page report said.
Freedom of movement
While Israeli authorities insist the measures are necessary to prevent possible attacks, the controls prevent Palestinians and their goods from traveling to other countries from the West Bank and Gaza Strip, the report said.
"Any economy is dependent on movement," said Philippe Egger, one of the authors of the report. "The Palestinians basically cannot move their goods or export."
"The Palestinians basically cannot move their goods or export"
Report author Philippe Egger
The report urged Israel to relax restrictions on the movement of Palestinian persons, goods, and vehicles.
Without such measures, the issue of poverty in Palestinian territories will persist and lasting peace in the region will remain elusive, it said.
"This calls for a rapid lifting of closures, better access to the Israeli labour market and improved trade facilities," the report said.
ILO expressed particular concern with the fate of Palestinian youths between 15 and 24, some 40% of whom are unemployed.
"Idleness among young people faced with military occupation makes a fertile breeding ground for extremism and violence," the report warned.
The report also said Palestinians have to take measures to improve human security in the region, which "cannot be separated" from economic and social security.
The ILO study was made on the basis of meetings with Palestinian, Israeli and Syrian labour officials and employer groups.