Economists turn to private sector data as government jobs reports stall
US employers announced 54,064 job cuts in September, a 37% drop from August but still part of a year that has seen the highest number of layoffs since 2020, according to Challenger, Gray & Christmas.
Year-to-date, companies have cut 946,426 jobs, up 55% from last year and already 24% above the full-year 2024 total.
“It’s very likely job cut plans are going to surpass a million for the first time since 2020 and for the ninth time in our series,” Andy Challenger, senior vice president and labor expert at the firm, said.
“Previous periods with this many job cuts occurred either during recessions or, as was the case in 2005 and 2006, during the first wave of automations that cost jobs in manufacturing and technology,” Challenger said.
Hiring plans, meanwhile, have collapsed to the lowest level since 2009. Employers have announced just 204,939 new jobs so far in 2025, a 58% drop from the same period last year.
Seasonal hiring announcements, typically robust in the fall, have been especially weak. September’s total was the lowest since the aftermath of the financial crisis.
Government and tech lead the cuts
The government sector accounted for the largest share of layoffs, with 299,755 planned job cuts, most tied to federal workforce reductions. Technology companies have announced 107,878 cuts, reflecting ongoing disruption from artificial intelligence and automation.
“Tech firms are undergoing incredible disruption with AI that is not only costing jobs, but also making it difficult to land positions, particularly for entry-level engineers,” Challenger said.
Retailers have also seen a sharp rise in layoffs, up 203% from last year, while hiring in the sector remains muted.
Regional disparities and reasons for cuts
The East region, driven by federal layoffs in Washington, DC, saw the steepest increase in job cuts, up 193% year-over-year. Other states such as New Jersey and Arizona posted triple-digit percentage increases.
Market and economic conditions, cost-cutting, and technological updates (including AI) were among the top reasons cited for workforce reductions. Cuts attributed specifically to artificial intelligence reached 17,375 so far this year, with 7,000 in September alone.
Fed rate cut prospects: What’s next for mortgage professionals?
With the Federal Reserve closely monitoring employment data, the surge in layoffs and weak hiring could strengthen the case for a rate cut in the coming months. The odds of a Fed rate cut in October have hit 100%, according to the CME FedWatch tool.
“With rate cuts on the way, we may see some stabilizing in the job market in the fourth quarter, but other factors could keep employers planning layoffs or holding off hiring,” Challenger said.
The Challenger report’s findings echo recent alternative labor market indicators from the Chicago Fed, which showed unemployment at 4.34% in September, barely changed from August but near a two-year high. The ADP National Employment Report also revealed that the private sector shed 32,000 jobs in September.
With official government jobs data delayed by the shutdown, economists are increasingly relying on these private-sector measures when assessing the labor market and considering future rate moves.
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