It was not apparent whether Mr Cameron spotted the message as he watched the band before applauding at the end of the performance.
Squeeze were at the peak of their popularity during the 1980s' Thatcher years, with hits including Cool for Cats and Up the Junction.
A Labour spokesman said: "Squeeze gave a remarkably timely voice to what millions of people are thinking about how this government is failing."
It came after Sunday newspapers carried Mr Cameron's latest announcement - the possible demolition of Britain's 100 worst “sink” estates in a new redevelopment drive.
The £140 million redevelopment programme is to be overseen by Lord Heseltine, who helped to transform the Liverpool and London docks in the 1980s.
Writing in The Sunday Times, Mr Cameron said: "Within these so-called sink estates, behind front doors, families build warm and welcoming homes.
"But step outside in the worst estates and you're confronted by concrete slabs dropped from on high, brutal high-rise towers and dark alleyways that are a gift to criminals and drug dealers.
"Decades of neglect have led to gangs and antisocial behaviour. Poverty has become entrenched, because those who could afford to move have understandably done so."
Source: http://telegraph.feedsportal.com/c/32726/f/579309/s/4cc385e0/sc/13/l/0L0Stelegraph0O0Cnews0Cpolitics0Cdavid0Ecameron0C120A918420CBand0Echanges0Elyrics0Eto0Eaccuse0EDavid0ECameron0Eof0Edestroying0Ethe0Ewelfare0Estate0Eas0Ehe0Ewatches0Bhtml/story01.htm