The U.S. labor market showed signs of stagnation in September, with hiring slowing sharply and layoffs remaining persistent, according to alternative data sources compiled by the Chicago Federal Reserve and Challenger, Gray & Christmas. These reports are filling in for the usual government labor data, which remains unavailable due to the ongoing federal government shutdown.
“With the Department of Labor on pause, we are increasingly relying on private and regional indicators to track employment trends,” said Andy Challenger, Senior Vice President at Challenger, Gray & Christmas.
Federal Reserve Steps In With Alternative Labor Dashboard
The Chicago Fed released a dashboard of labor market indicators for September, showing unemployment at 4.34%, nearly unchanged from August and only 0.01 percentage point below 4.4%—a level not seen since October 2021.
Other metrics from the central bank’s dashboard provide additional context:
- Layoff rate remained steady at 2.1%, indicating that employer reductions in workforce were largely stable month-over-month.
- Hiring rate dipped slightly to 45.2%, down 0.4 percentage points from August, signaling cautious hiring behavior among businesses.
These figures suggest that while unemployment has not spiked dramatically, hiring momentum has slowed considerably, consistent with broader signs of a labor market softening
Challenger Reports Deep Cuts and Weak Hiring
Meanwhile, Challenger, Gray & Christmas noted that layoff announcements fell 37% in September, marking a modest easing compared to recent months. Year-over-year, layoffs were 26% lower than September 2024, yet the total number of planned furloughs through the first three quarters of 2025 has reached 946,426, up 24% from 2024, and the highest level since the Covid-19 pandemic in 2020.
The hiring landscape paints a more concerning picture. According to the firm, new hiring totaled just 204,939 so far in 2025, a 58% decline from the same period last year, marking the lowest level since 2009—the depths of the financial crisis.
Implications for Economists and Policymakers
With the government shutdown now entering its second day, traditional labor market data points—like the weekly initial jobless claims and the upcoming nonfarm payrolls report—are postponed indefinitely. Economists and Federal Reserve officials are increasingly turning to alternative datasets from private firms, regional banks, and industry groups to assess economic trends.
“Policymakers are flying blind without official labor data,” said a labor economist at a major research firm. “Alternative sources are useful, but they can’t fully replace the comprehensive national surveys from the Labor Department.”
The lack of official reporting complicates decision-making for the Fed, which must weigh potential rate cuts against a labor market that is showing slowing hiring but stable unemployment.
Broader Economic Context
Despite the slowdown in hiring, many companies remain reluctant to lay off workers aggressively, a pattern consistent with a tight labor market in recent years. However, the steep drop in new hirings suggests that businesses are pausing expansion plans amid uncertainty over federal policy, economic growth, and inflation.
The disconnect between stable unemployment and declining hiring points to a cautious labor environment: fewer new jobs are being created, but layoffs have not surged dramatically—at least not yet.
Analysts warn that continued shutdowns and delayed data releases could cloud the Fed’s ability to calibrate monetary policy, potentially prompting more aggressive measures once accurate figures become available.
“Even with layoffs down, the historically low hiring numbers are a red flag,” Challenger said. “If these trends persist, they could affect wage growth, consumer spending, and overall economic momentum.”
Looking Ahead
The timing of the government shutdown adds uncertainty at a crucial moment for labor market tracking. With nonfarm payroll data and initial jobless claims delayed, economists will continue leaning on private-sector reports and regional Federal Reserve dashboards to gauge employment conditions.
Markets and policymakers alike are closely watching how this combination of muted hiring and ongoing shutdown impacts the broader economy. Analysts emphasize that while unemployment has remained near historic lows, the dramatic slowdown in new hires represents a potential headwind for economic growth heading into the final quarter of 2025. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.
