Unemployment Stable at 4.3% as Layoffs Rise and Hiring Slows

The Federal Reserve Bank of Chicago has estimated that the U.S. civilian unemployment rate for September 2025 remained at 4.3%, unchanged from August. This projection, derived from the Chicago Fed Labor Market Indicators, combines real-time private-sector data with official labor statistics to forecast the Bureau of Labor Statistics (BLS) unemployment rateChicago Fed Labor Market Indicators: Latest Release^[1]. The estimate reflects a slight upward pressure from a 2.10% layoffs and other separations rate in September compared to 2.09% in August, offset by a hiring rate for unemployed workers of 45.22%, down marginally from 45.61% in the prior monthChicago Fed Labor Market Indicators: Latest Release^[1]. The model's 50% and 68% prediction intervals suggest a 16.9% probability of a 0.2 percentage point or higher increase in the unemployment rate, indicating limited upside riskIntroducing the Chicago Fed Labor Market Indicators^[3].

The Chicago Fed's methodology integrates high-frequency labor market data-such as initial unemployment insurance claims, job postings, and Google Trends-into a statistical model calibrated to historical BLS dataChicago Fed Labor Market Indicators: Forecast Details^[2]. This approach translates job flow rates into a flow-consistent unemployment rate, which aligns closely with the BLS's U-3 measure. For September, the flow-consistent rate implied a 4.3% unemployment rate, consistent with the August figureIntroducing the Chicago Fed Labor Market Indicators^[3]. The stability in the unemployment rate contrasts with the BLS's actual September 2024 rate of 4.09%, highlighting a gradual trend in labor market conditionsChicago Fed Labor Market Indicators: Latest Release^[1].

The labor market's resilience is further underscored by the August unemployment rate of 4.3%, the highest since 2021. This consistency between August and September estimates suggests a lack of rapid deterioration, despite a modest rise in job separations. The hiring rate for unemployed workers, while slightly lower, has historically acted as a buffer against upward pressure on unemploymentChicago Fed Labor Market Indicators: Latest Release^[1]. The Chicago Fed's analysis attributes the stability to a balance between inflows (layoffs) and outflows (hiring) in the labor market, with neither factor dominatingIntroducing the Chicago Fed Labor Market Indicators^[3].

The government shutdown in October 2025 has amplified the significance of the Chicago Fed's estimate, as the official BLS report for September was delayedWith the US government dark, alternate sources show…^[4]. Federal Reserve President Austan Goolsbee emphasized the importance of alternative metrics during such gaps, noting the Chicago Fed's model as a reliable proxyWith the US government dark, alternate sources show…^[4]. This context has heightened attention on the indicators, particularly as policymakers assess the need for further interest rate cuts. The Fed's September rate cut of 25 basis points was partly justified by the labor market's signs of cooling, including the elevated unemployment rate.

The statistical model underpinning the Chicago Fed's forecast incorporates partial least squares regression to align real-time data with CPS-derived job flow ratesChicago Fed Labor Market Indicators: Forecast Details^[2]. The 4.3% estimate for September is rounded from 4.32%, with the model's prediction intervals reflecting inherent uncertainties. While the data suggests a stable labor market, the 16.9% probability of a 0.2 percentage point increase underscores potential risks, such as further weakening in hiring activityIntroducing the Chicago Fed Labor Market Indicators^[3]. Analysts have noted that the Federal Open Market Committee (FOMC) is likely to remain data-dependent, with subsequent labor reports and economic indicators shaping the trajectory of rate cuts.

The next iteration of the Chicago Fed Labor Market Indicators is scheduled for October 2, 2025, providing further insights into labor market trends ahead of the delayed BLS reportIntroducing the Chicago Fed Labor Market Indicators^[3]. For now, the 4.3% unemployment rate estimate offers a critical benchmark for policymakers and markets navigating the uncertainties of the current economic environmentWith the US government dark, alternate sources show…^[4].