The US labor market is painting a contradictory picture: layoff activity continues to cool, yet companies' willingness to expand hiring is equally subdued, reflecting a widespread wait-and-see mood among businesses amid multiple uncertainties.

According to a report released by staffing firm Challenger, Gray & Christmas Inc. on Thursday, October 1, US companies announced nearly 20% fewer layoffs in September year-over-year, totaling 43,281 — the lowest level for any September since 2022. Data released the same day by the US Bureau of Labor Statistics showed that initial unemployment claims fell below 200,000 for a third consecutive week, approaching a historic low not seen since 1969.

However, the other side of the labor market also warrants caution. Companies announced only 90,787 hiring plans in September, down 23% year-over-year and the lowest September level since 2011. The seasonal hiring surge that typically accompanies the holiday shopping season failed to materialize, indicating employers are cautious about the future direction of the economy. Federal Reserve rate hikes, elevated energy prices, and ongoing instability in Iran constitute the main factors suppressing corporate hiring intentions.

Layoffs Cool, Jobless Claims Near Lowest Since 1969

The Challenger report showed that September layoffs fell 18% month-over-month. In the first nine months of the year, companies announced a total of 573,195 layoffs, down 39% from 946,426 in the same period of 2025. Planned layoffs in the third quarter plunged 43% year-over-year.

Data released the same day by the Bureau of Labor Statistics showed that for the week ending September 26, seasonally adjusted initial claims for state unemployment benefits totaled 197,000, a decrease of 1,000 from the prior week and below the 200,000 expected by economists surveyed by Reuters. Claims have now been below 200,000 for three consecutive weeks, nearing the lowest level since 1969.

Continuing claims also declined, falling to a seasonally adjusted 1.701 million for the week ending September 19, the lowest level since April 2023.

Some economists noted that if historically low layoff figures persist, they could spark concerns about an overheating labor market. Stephen Stanley, chief US economist at Santander US Capital Markets, said, "It appears we are still far from that outcome, but this is a new risk that the Federal Open Market Committee (FOMC) is watching."

Companies Enter Wait-and-See Mode, Planned Hiring Down 23% Year-over-Year

Despite the slowdown in layoffs, companies' willingness to expand hiring has shrunk in tandem. The number of announced hiring plans in September rebounded sharply from 12,325 in August, but was down 23% compared with the same period last year, setting the lowest September record since 2011.

In a statement, Andy Challenger attributed the phenomenon to a combination of pressures. "Companies are currently in a holding pattern," he said. "Employers are facing high energy costs, an uncertain outlook for war in Iran, rate hikes that could raise hiring costs, and potentially surging healthcare costs."

The September FOMC meeting unanimously approved the first rate hike in three years and hinted at further monetary tightening ahead. CME tools show the market currently expects about a 37.1% probability of another rate hike at the Fed's October 27-28 meeting, down sharply from 68.6% a week earlier.

Carl Weinberg, chief economist at High Frequency Economics, said, "At some point, persistently high energy and raw material costs will force companies to cut marginal workers to protect profit margins, but no such signal has emerged yet."

Tech Layoffs Rebound, AI Becomes the Biggest Layoff Driver of the Year

By sector, technology companies announced 10,799 layoffs in September, surging 77% from 6,103 in August.

In the first nine months of the year, the technology sector accounted for 29% of all layoffs, the highest among all industries.

Notably, market and economic conditions were the primary reason cited for layoffs in September, but from a full-year perspective, artificial intelligence (AI) has become the most frequently cited reason for layoffs, accounting for about 21% of all planned job cuts.

Nonfarm Payrolls Report Expected to Show Slowing Job Growth

The above data provides a forward-looking reference for the US September nonfarm payrolls report due Friday.

According to reports, the consensus expects nonfarm payrolls to increase by about 90,000 in September, with the unemployment rate unchanged at 4.1%.

A survey released Tuesday by the Conference Board showed that the share of consumers who described jobs as "plentiful" in September fell to the lowest since February 2021, while the proportion saying jobs were "hard to get" rose to the highest in more than five and a half years, indicating that ordinary workers' subjective perception of the job market has clearly turned more pessimistic.