US Labor Market Struggles Amid Government Shutdown in October 2025

In October 2025, the U.S. labor market exhibited signs of weakening, as indicated by several private reports. The prolonged federal government shutdown, which began on October 1, 2025, led to the unavailability of official employment data, necessitating reliance on alternative sources.

According to workforce analytics company Revelio Labs, the economy shed approximately 9,100 jobs during October. This decline was primarily driven by reductions in government payrolls, which decreased by 22,200 positions, and the retail sector, which lost 8,500 jobs. Conversely, the education and health services sector added 22,000 jobs.

The Chicago Federal Reserve estimated that the unemployment rate edged up to 4.36% in October, a slight increase from 4.35% in September. This estimate was necessitated by the absence of official statistics due to the government shutdown.

Global outplacement firm Challenger, Gray & Christmas reported a significant surge in planned layoffs, which increased by 183% to over 153,000 in October—the highest for the month in 22 years. The technology sector led these layoffs, with companies like Amazon announcing substantial job cuts. Factors contributing to this trend included cost-cutting measures and the adoption of artificial intelligence.

The federal government shutdown, now in its second month, has had profound effects on the labor market and the broader economy. An estimated 900,000 federal workers have been furloughed, with an additional 700,000 working without pay. The Department of Agriculture, Internal Revenue Service, and other agencies have implemented significant furloughs.

The Congressional Budget Office (CBO) warned that the ongoing shutdown could cost the economy between $7 billion and $14 billion. The potential economic impact includes up to a 2% reduction in GDP for the fourth quarter due to halted government spending on employee wages, procurement, and food assistance programs.

The shutdown has halted in-person data collection by the Bureau of Labor Statistics (BLS), essential for compiling the Consumer Price Index (CPI), the main measure of inflation. Without new data, the Federal Reserve lacks critical insights needed to guide policy decisions.

The technology industry has been particularly affected, with companies like Amazon announcing substantial job cuts. Factors contributing to this trend include cost-cutting measures and the adoption of artificial intelligence.

The retail sector experienced a loss of 8,500 jobs in October, reflecting broader economic challenges and shifts in consumer behavior.

In contrast, the education and health services sector added 22,000 jobs, indicating resilience in these areas despite overall labor market weaknesses.

The weakening labor market and prolonged government shutdown have several social and economic implications. Delayed paychecks for furloughed federal workers could harm households, dampen consumer spending, and strain local economies.

The lack of official economic data complicates policymaking, as agencies like the Federal Reserve rely on accurate statistics to guide decisions.

A federal judge has blocked the Trump administration from carrying out mass layoffs of federal workers amid the shutdown, ruling that proper legal procedures hadn't been followed.

The current situation bears similarities to previous government shutdowns but differs in duration and economic impact. The 2013 shutdown lasted 16 days and affected 850,000 workers. The current shutdown, now in its second month, has furloughed approximately 900,000 federal workers, indicating a more prolonged and widespread impact.

While previous shutdowns have had significant economic costs, the current shutdown's potential to reduce GDP by up to 2% in the fourth quarter underscores its severity.

The combination of a prolonged government shutdown and emerging private reports paints a concerning picture of the U.S. labor market in October 2025. With significant job losses, a rise in planned layoffs, and the absence of official data, policymakers and businesses face heightened uncertainty as they navigate the economic landscape.