By Lucia Mutikani
WASHINGTON (Reuters) -The U.S. economy shed jobs in October amid losses in the government and retail sectors, while cost-cutting and the adoption of artificial intelligence by businesses led to a surge in announced layoffs, data showed on Thursday.
The reports, including an estimate from the Chicago Federal Reserve that the unemployment rate edged up last month from September, would at face value suggest a deterioration in labor market conditions. But a shutdown of the government, the longest on record, and the accompanying official economic data blackout have made it impossible to gauge the labor market status.
The shutdown, now in its second month, has delayed the release of the Labor Department’s closely watched employment report for September. October’s report that was due on Friday will also not be published, and doubts are mounting on whether it will be released when the government eventually reopens.
Privately produced employment reports are, however, increasingly painting a dim picture of the labor market.
Data from workforce analytics company Revelio Labs showed 9,100 jobs were lost October, with government payrolls declining by 22,200 positions. It was unclear whether the decrease reflected employees who took buyouts and dropped off government payrolls at the end of September or federal workers who have been furloughed during the shutdown.
Retailers shed 8,500 jobs, data showed. There were, however, moderate gains in the education and health services sector, which added 22,000 jobs.
Announced layoffs jumped 37% to 43,600 last month, Revelio Labs said. Separately, the Chicago Federal Reserve estimated the unemployment rate climbed to 4.36% last month – 4.4% on the rounded basis typically reported by the Labor Department’s Bureau of Labor Statistics – from an estimated 4.35% in September.
The Chicago Fed has been providing twice-monthly estimates of the jobless rate since shortly before the shutdown. The last U.S. jobless figure published by the BLS, for August, put the rate at 4.3% – the highest since October 2021 when it was 4.5%.
“The October 2025 reference week (October 12th through October 18th) for the BLS survey used to estimate the unemployment rate overlapped with the federal government shutdown that began in early October,” the Chicago Fed said.
The nonpartisan Congressional Budget Office estimated if all furloughed workers in October were counted as unemployed on temporary layoff, the unemployment rate would increase by 0.4 percentage points that month. The Bipartisan Policy Center estimated at least 670,000 federal workers have been furloughed.
COST-CUTTING AND AI BOOST PLANNED LAYOFFS
A third report from global outplacement firm Challenger, Gray & Christmas showed planned layoffs soared 183% to 153,074 in October, the highest for the month in 22 years.
“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, workplace expert at Challenger, Gray & Christmas.
“Those laid-off now are finding it harder to quickly secure new roles, which could further loosen the labor market.”
The jump was led by technology companies, with 33,281 job cuts announced, sharply up from 5,639 in September. Amazon last week said it would cut up to 14,000 jobs from its global corporate workforce.
Planned layoffs so far this year have soared 65% to just over 1 million compared to the first 10 months of 2024. Still, actual layoffs have largely remained low this year, at least through mid-September, before the government shutdown.
States have continued to collect data on weekly applications for unemployment benefits and send it to the Labor Department. Economists have accessed the data and made their own estimates, which have shown no deviation from what they and policymakers have dubbed a “no hire no fire” labor market.
Cost-cutting was the top reason employers cited for job reductions in October, accounting for 50,437 announced layoffs, Challenger, Gray & Christmas said. AI was the second-most cited factor, making up 31,039 of the planned job cuts.
Though hiring intentions picked up amid recruitment for the holiday season, the monthly average of 48,808 was significantly lower than the 64,163 recorded in 2024. Lackluster hiring was corroborated by a separate report from Gusto, a payroll and HR software platform for small businesses, which showed job losses in October for the first time since January.
“This isn’t a crisis, but it’s a clear signal that sustained high interest rates, tariff uncertainty and rising costs are finally forcing even the most resilient corner of our economy to pump the brakes,” said Andrew Chamberlain, principal economist at Gusto. “The fact that small businesses, which have been adding jobs every month for most of this year, are now pulling back tells us these economic headwinds aren’t theoretical anymore. They’re showing up in real hiring decisions.”
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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