The United States labour market showed fresh signs of weakness in October as alternative data sources revealed a surge in layoffs and a rise in unemployment, driven by widespread cost-cutting and the growing impact of artificial intelligence.
According to the Chicago Federal Reserve, the nation’s unemployment rate climbed to 4.36% in October - rounded to 4.4% - from 4.35% the previous month.
The increase marks the highest level since October 2021, when unemployment stood at 4.5%.
The Fed’s estimate comes amid a record-breaking government shutdown that has suspended official labour and economic data releases from the Bureau of Labor Statistics (BLS), Bureau of Economic Analysis, and Census Bureau.
“The October 2025 reference week for the BLS survey overlapped with the federal government shutdown that began in early October,” the Chicago Fed said in its statement. “This special factor is likely to be only partially reflected in the October 2025 Final release of the Chicago Fed Labor Market Indicators.”
The Congressional Budget Office estimated that as many as 750,000 federal workers were furloughed during the shutdown - representing about 0.4% of the civilian labour force as of August 2025.
While the shutdown has clouded the true picture of the economy, private data from global outplacement firm Challenger, Gray & Christmas provided one of the clearest signals yet of a softening job market.
The firm reported that U.S.-based employers announced more than 150,000 job cuts in October, marking the highest monthly total in more than two decades.
Layoffs surged 175% from a year earlier to 153,074, with employers announcing over 1.09 million job cuts through the first ten months of 2025 - a 65% increase compared to the same period last year.
Job cuts are now at their highest level since 2020, when over 2.3 million layoffs were reported through October during the peak of the pandemic.
“Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,” said Andy Challenger, chief revenue officer at Challenger, Gray & Christmas.
Technology firms led October’s wave of layoffs, followed by retailers and the services sector. Cost-cutting remained the top reason for job reductions, while the report also cited artificial intelligence as an increasingly significant factor behind employment shifts.
“Not only did individual companies announce large layoff totals in October, but a higher number of companies announced job cut plans,” Challenger added, noting that nearly 450 individual job cut plans were tracked in October compared with under 400 in September.
