Why U.S. Unemployment is Rising Again in 2025 — What the Latest Data Shows

Two new realities now define the American labor market: one where the jobs are stacking up and another where unemployment is catching up. It started on a positive note with the US adding a reassuring 119,000 jobs in September, but somehow the headline still belongs to the unemployment rate, which has risen to 4.4%, up from 4.3% in August 2025. The numbers validate a slow upward creep that continues to be persistent.  

A closer look at the report unveils the story much clearly. Job growth is on the rise, but it’s deeply uneven. Healthcare accounted for the most gains, totaling 43,000 positions, and the services sector remains the driving factor behind US labor, with food and beverages adding 37,000 jobs and social services carrying the momentum with 14,000. But even then, the implicit cooling is apparent in the numbers: Average hourly earnings merely escalated to 3.9% year over year in May, a drastically slower pace than early 2025, and job growth remains condensed in only a few industries. Signaling that the market is expanding but losing momentum with each passing month. 

If the labor market looks promising on paper, it's because many of the ailments remain under the surface. By May 2025, 139,000 jobs were added by employers; however, unemployment remained at 4.2%, with the main contributors being job losers and re-entrants. In other words, hiring is proceeding, but not quickly enough to allow everyone to ease back into the market. 

Compounding the strain is the consistent number in slow hiring across different states. State-level data shows the divergence clearly: over the past 12 months, unemployment fell by –0.7 in Indiana and –0.6 in Illinois, and –0.6 in Kentucky, while it rose by as much as +1.0 in Oregon and +0.6 in states like Minnesota and Maryland. Michigan and North Carolina, meanwhile, show little year-over-year movement, sitting close to 0.0 and reinforcing how the national picture masks sharply different local outcomes. Trading pedia reports 7.3 million Americans were unemployed in August 2025, up 7.6% year over year, and metropolitan cities like EL Centro, California were adversely affected, with 20.21%.  At the same time, 22,000 federal employees have been eliminated, and temporary-help shed 20,000 roles. Federal workers are now 59,000 lesser than in January. This wide divide has left broad swathes of the private economy with thin hiring pipelines. The effect is exact and straightforward: more people are searching for jobs, with fewer seats against the backdrop of an unemployment rate that continues to rise even when the headline hiring numbers tell otherwise.